Slower Online Retail Growth to Benefit Out-of-Town Retail in Europe
Out-of-Town Retail Thrives as Online Growth Stalls in Europe
European retail real estate is seeing a shift in fortunes, with out-of-town shopping centers and warehouses outperforming traditional high streets. While online retail growth has slowed, creating opportunities for physical stores outside city centers, prime high street locations continue to face challenges.
Online Retail’s Pandemic Boom Fades
The pandemic-fueled surge in online shopping appears to be waning.Consumers are returning to physical stores, and recent data suggests online retail shares are growing more slowly across Europe.
“The pandemic boost to online spending has waned,” notes a recent report from Knight Frank. This trend is echoed by Eurostat data, which shows online retail sales volume in the eurozone has fallen nearly 15% from its 2021 peak, though it remains about 25% above pre-pandemic levels.
Southern Europe Holds Strong Against Online Competition
Interestingly, online retail penetration remains lower in Southern Europe compared to Northern Europe. This difference, which existed pre-pandemic, persists, suggesting that high streets in Southern Europe might potentially be less vulnerable to online competition.
out-of-Town Retail Leads the Recovery
Simultaneously occurring, non-high-street retail subsectors are experiencing a robust recovery. Prime retail parks are leading the charge, but retail warehouses, big box stores, and neighborhood and convenience centers are also seeing strong rent growth.
several factors are driving this trend. supply conditions for out-of-town retail have tightened, with vacancy rates falling below pre-pandemic averages. Demand is also strong, fueled by the rise of remote work and a preference for shopping closer to home.
Malls Face Continued Challenges
While out-of-town retail is thriving, traditional malls continue to face headwinds. Increased vacancy rates and competition from online retailers, particularly in fashion and electronics, are putting pressure on mall rents.
However, malls that adapt to changing consumer preferences by offering experiences like food options and entertainment are performing better. These “experience” malls are attracting foot traffic and outperforming their more traditional counterparts.
Prime Assets Outperform
Across all retail subsectors, prime assets are outperforming average quality properties. The gap between prime and average rent growth for shopping centers and retail parks is significant, highlighting the importance of location and quality in today’s retail market.
Looking Ahead
While online retail will continue to grow, its pace is likely to be more moderate. This, coupled with the strong performance of out-of-town retail, suggests that prime retail parks, warehouses, and neighborhood centers are well-positioned for continued growth in the coming years. High streets, particularly in prime locations, will need to adapt and evolve to remain competitive.
High Streets Struggle as Out-of-Town Retail thrives in Post-Pandemic Europe
NewsDirectory3.com Exclusive Interview
NewsDirectory3.com: Thank you for joining us today. Can you shed some light on the shifting landscape of European retail real estate?
Retail Specialist: Certainly. We’re seeing a fascinating change in consumer behavior post-pandemic. While online retail soared during lockdowns, its growth has plateaued, and shoppers are increasingly returning to physical stores. However, this recovery isn’t uniform across all retail sectors.
NewsDirectory3.com: Where are we seeing the strongest recovery, and where are the challenges?
Retail Specialist: Surprisingly, it’s not the customary high streets leading the charge. Out-of-town retail, including shopping parks, warehouses, and big box stores, is experiencing a notable boom. This is driven by several factors – tighter supply, increased demand for convenience shopping, and the rise of remote work.
NewsDirectory3.com: Interesting. What about traditional malls?
Retail Specialist: Malls are facing continued pressure, especially from online competition in sectors like fashion and electronics. However, malls that are evolving to offer experiences – think entertainment, dining, and community spaces – are faring better.
NewsDirectory3.com: It sounds like location and quality are crucial in this new retail landscape?
Retail Specialist: Absolutely. Prime assets, both in out-of-town locations and high-street prime spots, are outperforming average properties. Consumers are willing to pay a premium for a good experience and convenient location.
NewsDirectory3.com: What does the future hold for European retail?
Retail Specialist: We can expect moderate but steady growth in online retail.Though, out-of-town retail, notably prime locations, are well-positioned for continued growth.Traditional high streets, especially prime locations, will need to adapt and offer unique experiences to remain competitive.