This seventh edition of How Active Are Retailers Globally? looks at the target markets for over 150 international brands based in the Americas, Asia Pacific and Europe, Middle East and Africa (EMEA).
In 2016 we expect to see global economic recovery continue at a steady pace, with modestly improving growth in many mature markets. However, there are potential headwinds on the horizon: interest rising rates in the U.S., a depreciation of the Chinese Yuan and a financial crisis in one or more emerging markets.
Within this setting, albeit cautiously, retailers continue to expand their physical store networks despite the ongoing challenges of increasing costs, unsteady economies in some markets and the challenges and opportunities that come with technology
Global luxury Retail: a divergent market
Is luxury immune to the twist ad turns of global economy?
The world of luxury continues to fascinate and intrigue, with brand names synonymous with luxury now shouting out to us from many locations around the world. CBRE has invested in research to get beneath the surface of luxury in three traditional cities across Europe: London, Paris and Milan to explore some insights from luxury consumers, along with a look at the economic impact on luxury and how they combine with retailers' strategy plans. And finally, to expand the view of luxury, we also engaged our market experts in New York, Mumbai and Lagos.
In its eighth year CBRE's How Global is the Business of Retail? will once again focus on the target markets for new brands in 2014.
We examined 50 countries and 164 cities across the world to provide a comprehensive view of the markets that international brands have been targeting.
By analysing the brand sectors that have been expanding and the flow of cross-border expansion we are able to interrogate what that means and impact is likely to have on retail markets in all the regions.
As we move towards the busy 4th quarter trading period, this report highlights some of the major trends seen in European commercial property markets so far in 2016. The big event in the political sphere was undoubtedly the surprise result in the UK referendum but excluding the UK, the demand for real estate in Europe has remained strong.
Of the 35 largest non-UK office markets in Europe, prime office yields have continued to fall in 22 of them so far in 2016 with yields remaining stable. The pattern of office leasing across the European markets continues to reflect the economic situation: positive but slow growth with some marked differences from place to place reflecting offsets in the timing of cycles; all tempered with a degree of caution from the lead-up to, and result of, the EU referendum in the UK.
The increased attraction of prime property is linked to the policy adopted by the ECB over the past two years. We now have negative short-term policy rates and very low long-term government bond yields. This has pushed investors towards alternative “near bond-like” assets which offer some characteristics of fixed income and security. Prime property goes some way to fitting the description and steadily rising rents and falling vacancy have helped to make the case.
The majority of retail markets across Europe have seen positive retail sales volume growth so far in 2016 and the EU average growth rate has been a healthy 3.2% .
The industrial & logistics markets have also performed well so far in 2016 even in the UK, where logistics occupier demand was surprisingly strong amidst a general referendum-linked slowdown.
Although uncertainty around the impact of the referendum will weigh on parts of the UK market, continuing economic growth and an ongoing very low interest rate environment will continue to drive real occupier and investor demand over the rest of 2016 and into 2017 despite the plethora of elections and referenda still to come.
•BOTH PRIME HIGH STREET AND SHOPPING CENTRES SEE POSITIVE BUT SLOWING RENTAL GROWTH IN Q2
The CBRE EMEA Prime High Street rent index grew by 1.81% q-o-q and 6.89 % y-o-y, however there has been a slowing of these growth rates compared to the 2.1% growth we saw in Q1. It’s a similar story with the Prime Shopping Centre index as it grew by 0.36% q-o-q and 2.28% y-o-y in Q2 slower than the 0.65% growth we saw in Q1.
•CONSUMER CONFIDENCE STABILISES IN Q2
Consumer confidence has started to recover in Q2 from the downward trend we saw in Q1. In the second quarter of 2016 consumer confidence improved moving from -7.3pts to -5.7pts. Although consumer confidence has improved and is significantly above its long term average, greater uncertainty in the second half of the year may impact consumer confidence going into Q3.
•RETAIL INVESTMENT TOTALLED €12.8 BILLION IN Q2
The UK remains the key target for European retail investment, followed by Germany; Europe’s second largest market. Regional centres led the market as assets in core markets are in short supply. The gap between prime and secondary yields remains wide as investors continue to play a risk-adverse strategy.
How Global is the Business of Retail? is now in its ninth edition and analyses the operational networks of 334 leading international retailers across 61 countries, covering the vast majority of the world economy.
The focus of this edition is threefold:
To map the footprint of leading global retailers at country level and 191 of the world's largest cities.
To examine the extent to which retailers have expanded their global operations in 2015.
To provide a definitive benchmark against which to measure future changes in the global retail environment.
Global shopping centre completions have started to slow as parts of the global retail market witness the effects of an imbalance between significant supply and demand.
Despite this, there continues to be exceptional levels of construction, particularly in Asia. Globally, 10.7 million sq m of new space opened in 2015 in the 168 cities we surveyed; this is down on 2014, where 12.1 million sq m of space were completed; and a further 41.9 million sq m is under construction, up from 39 million in 2014.
Online retail is here and it’s not going away. Retailers have to cope with the changing dynamic of the consumer. The requirement and expectation for high levels of service in store are also reflected in the offline world. The challenge for online is that the only area where the consumer can ‘feel’ the service is in terms of delivery. The delivery either meets expectation or it doesn’t. A number of key take outs are evident:
Consumers expect everything to work properly – the website, the delivery and return mechanics
Convenience and price remain key
Retailers need a clear omnichannel strategy – the retail, logistics and marketing aspects have to work together
‘Free’ delivery will only be sustainable for a few – customers want excellence in service whether that be in store or online – it’s about value not about being pseudo-free
Christmas and Black Friday is not the right time to make dramatic changes to delivery options or to technical infrastructure – get it right before these key times hit
Promising something and not delivering is far worse than never promising at all
Customers want to click-and-collect
Customers do not want to pay for the privilege of visiting a retailer’s store to collect something they have bought
A great online site is meaningless without an equally great logistics operation in place
In a general sense, e-commerce is strengthening the already visible polarisation of demand for warehouse space: large central hubs vs last mile parcel centres (‘demand dumbbell’)
There are no linear logistics responses to the various online delivery models; trial-and-error and hybrid tailor-made operations dominate, leading to a more prominent role for logistics service providers
The emphasis on convenience, customer satisfaction and an efficient return management is expected to lead to a more intricate network of last mile solutions: both parcel hubs and pick-up/drop-off sites.
Moderate economic growth with low interest rates, punctuated with bouts of pessimism and volatility—the factors that have characterized the world economy for the past few years—are likely to continue in 2016, supporting moderate growth in commercial rents and investment sales volume globally.
This seventh edition of How Active Are Retailers Globally? looks at the target markets for over 150 brands based in the Americas, Asia Pacific and Europe, Middle East and Africa (EMEA).
In 2016 we expect to see global economic recovery continue at a steady pace, with modestly improving growth in many mature international markets. However, there are potential headwinds on the horizon: rising interest rates in the U.S., a depreciation of the Chinese Yuan and a financial crisis in one or more emerging markets.
Within this setting, albeit cautiously, retailers continue to expand their physical store networks despite the ongoing challenges of increasing costs, unsteady economies in some markets and the challenges and opportunities that come with technology.
The recent equity market volatility has focussed many minds on downside risk but there are good reasons to expect that European property will outperform other assets in 2016.
Office leasing is still in an early stage of recovery in many European countries/cities, and occupier demand will continue to improve as the economic recovery continues.
Office vacancy rates fell at the fastest rate since 2007 in 2015 and are expected to fall further in 2016 helped by a so-far limited development response in most markets.
The dichotomy between high performing prime and struggling secondary retail will remain in 2016 but at least rising retail spending on the back of higher real disposable incomes will be of some benefit to all retail.
There is increasing emphasis on city logistics property with investors as well as occupiers attracted by the necessity of these properties in e-commerce supply chains.
The brands synonymous with luxury retail shout out to us from many locations around the world. To get beneath the surface of luxury retail trends, we look at the state of three traditional cities in Europe—London, Paris and Milan—as well as New York, Mumbai and Lagos.
We also consider the wider implications of the changing global economy for luxury retail, which, until recently, seemed immune to the headwinds impacting other parts of the economy. This includes the great challenge of forecasting dynamics within the Chinese consumer market, which now accounts for 30% of global luxury purchases.
In addition, we examine where retailers are seeking to expand, as their target markets are changing as the penetration of luxury in established locations reaches maturation.