Elsewhere: Main Streets’ Prospects

Europe’s Retailers Breaks Through 100 Million Sqm Mark

A record 13.8 million sqm of new shopping centre schemes are due to open across Europe this year and in 2007, according to global property services firm Cushman & Wakefield. In its European Shopping Centre Development report, Cushman & Wakefield expects that the total amount of gross leaseable area (GLA) of shopping centre space in Europe will break through the 100 million sqm mark to reach 107 million sqm by the end of 2007.

Remarkably, of new space, not including extensions, scheduled to open in 2006 and 2007, Russia tops the ranking on a country basis, followed by Poland and Italy. John Strachan, Cushman & Wakefield's global head of retail, said: "Passing the 100 million sqm mark will be an historic moment for retail as shopping centres have increasingly become a key part of life across an enlarged Europe."

Russia has an estimated 1.5 million sqm of new schemes due to open in the second half of 2006 and in 2007. One of the most active developers is Swedish retailer IKEA which is due to open five of its Mega Malls in the last quarter of 2006, in Ekaterinburg, Nizhny Novgorod, Dybenko in St-Petersburg, Parnas in St-Petersburg and Belaya Dacha in Moscow. Other schemes due for completion in Moscow before the end of 2007 include a business complex by the Korean Lotte Group which includes 18,000 m? of retail at the junction of the Garden Ring and the Novy Arbat retail district.

Boris van Haare Heijmeijer, Cushman & Wakefield's head of shopping centres in Europe, says: "The emerging markets of Central and Eastern Europe are seeing most growth in the amount of new space, but the more mature markets of Western Europe are also seeing high levels of development as developers remodel the concept of shopping centres to cater for the changing demands of occupiers and consumers."

New York, Hong Kong, Paris

This is not a flight route but the list of the world’s prime retail zones. Main Streets Across the World 2006, an annual report by Cushman & Wakefield, produced no sensation by saying that New York's Fifth Avenue has retained its top position as the world's most expensive shopping street in the world. Main Streets Across the World 2006 tracks retail rents in the world's top 233 shopping locations across 47 countries around the world. The report's global league table is drawn up by taking the most expensive location in each of the countries monitored.

An average 1,000 sq ft/93 sqm unit on Fifth Avenue, at its most expensive stretch near the junction with 57th Street, now costs around US$1.35mn a year.

Gene Spiegelman, Executive Director of Cushman & Wakefield in New York, comments: "The world's top brands are jostling for position in this prime stretch of retail. This is not just about sales at the till, but about the brand value of retail real estate. In a world of advertising 'clutter', we see companies increasingly leveraging their brands through real estate and Manhattan's Fifth Avenue is a prime example of this trend."

The trend-setting Abercrombie & Fitch flagship at 56th Street and Nokia's flagship on East 57th Street, which follows Apple Computer's success at Fifth Avenue and 59th Street, as consumers continue to pursue advances in technology and communication, are among this year's most high-profile openings on Fifth Avenue. Waiting in the wings is what may be the world's highest value retail lease - that of the former Asprey store at Trump Tower at 56th Street.

The biggest riser is the Indian capital of New Delhi, with the most expensive location being Khan Market, having gone up 17 places to now be in 24th place.

India's retail growth story has been spurred by the country's rapid economic growth and by increasing levels of disposable income, together with a higher consumer awareness towards the Western shopping environment and entertainment trends.

With respect to Khan Market, the most expensive location in India, Sanjay Dutt says: "Branded players look for quality space in a good location, which is exactly what Khan Market offers. This in turn has pushed up rents in the district because of a lack of available space. The area is located in the heart of a premium residential pocket, housing diplomats, industrialists, civil servants and high-net worth individuals, and offers a mix of local and international brands, including Nike, Benetton, Swarovski, McDonald's, Barista and Bandhej, among others."

Other significant risers in the ranking are the Belgian capital Brussels (Rue Neuve), up five places to 23rd, and the Romanian capital Bucharest (Bulevardul Magheru), up six places to 30th, with activity boosted with Romania on track to join the European Union in 2007.

On a regional basis, Asia Pacific has seen the highest rental increases in local currency terms; rents are up 20 per cent in the year to June 2006. India's retail locations have all seen big rental increases, and, adds Sebastian Skiff, Cushman & Wakefield’s Head of Retail in Asia Pacific: "In China, the government has recently approved a significant number of applications by foreign retailers, unlocking the doors for a flood of new retailers entering what is one of the world's most dynamic emerging markets."

Sanjay Dutt, Executive Director for Transaction Services, Cushman & Wakefield in India, says: "The 'organised' retail sector in India is forecast to grow by around 40-45 per cent on an annual basis over the next five years. Currently it has a mere 2 -3 per cent share of the total market, but this is foreseen to grow to up to 12-14 per cent by the end of this decade."

Although Moscow is not on the list of the world’s top most expensive cities of the world the Russian capital has retained the honorable 11th position secured last year.

Worldwide, rents rose or were stable in 97 per cent of locations monitored, falling in only three per cent. Looking ahead, Darren Yates, Associate, European Research, Cushman & Wakefield, and the report’s author, says: "The demand for modern retail property will continue to grow worldwide, in particular with the opening up of large and increasingly wealthy consumer markets such as India, China, Brazil and Russia, where the demand for consumer goods is growing rapidly together with the need for top-class retailers and high-quality retail facilities."

Few representatives of the fair sex do not enjoy shopping especially during Christmas sales. Shields reading “Sale” ‘adorn’ boutiques across the globe and glamorous women of the world do not think that buying a Versace item during sales at one-third of initial price is shameful. Gradually, ladies grow excited and cannot stop. Those are species now described with a new ironic word “shopaholic”. In order to avoid being compared to a heroine of Sophie Kinsella’s novel “The Secret Dreamworld of a Shopaholic” psychologists advise shoppers to jot down a list of planned buys and avoid using bank cards. Such measures may help keep emotions under control. Nowadays, as international shopping grows increasingly popular, it is important to be versed in national specifics of shopping in each given country.

Smaller Formats

The discussion on which retail format the future belongs to has been on for many years. While earlier major retailers took interest solely in locations with then number of residents exceeding 1 million, today they are quite satisfied with fewer customers who ensure stable demand.

"Russia is a booming market, and we are very optimistic about the future as demand remains strong – both from occupiers and consumers. Shopping centre developers are now turning their attention to developing schemes in cities of between 400,000 and 600,00 people," says Natalia Oreshina.

However, there is one more myth – about the threat supermarkets pose to boutiques and other specialized stores. Retailers in emerging economies but also in Great Britain voice concern over the situation. But statistics show that no such threat exists. Office of Fair Trading (OFT) reports that over the past five years the convenience store sector in Great Britain grew by 31%, while grocery retail increased only by 24%.

Evidently, seeking to secure themselves against possible risks owners of small specialized stores have acquired over 1,200 building sites, hoping to all appearances that by launching new outlets and thus expanding their presence they will be able to vie with supermarket chains.

Jonathan Reynolds is Director of the Oxford Institute of Retail Management says he is confident about the prospects of main streets. Certain retail streets in prosperous locations, such as Marlow and Bucks are quite viable, he says. They are able to maintain demand both for specialized stores and supermarkets. As to less favorable locations purchasing power there is too low to ensure demand for both formats. The main street is a very emotional expression, he is convinced. We have to determine what is meant thereby – main thoroughfares in big cities, market squares in small towns or gigantic retail centers in the countryside. Retail centers are changing in form and proportion, new formats emerge. Reynolds believes that retail property investors will have to be more versed in the sector.

Natalia Oreshina, senior director, Cushman & Wakefield Stiles & Riabokobylko, Cushman & Wakefield's Russian office, comments: "Russia is a booming market, and we are very optimistic about the future as demand remains strong – both from occupiers and consumers.

"Shopping centre developers are now turning their attention to developing schemes in cities of between 400,000 and 600,00 people," continues Natalia. "Before the emphasis was on the 'million-people' cities. We are also seeing leisure as an increasingly important anchor. For example, Russian developer The Regions is opening a 31,000 m? GLA scheme, June, in Saint-Petersburg in December of which around 50 per cent will be leisure, including a fitness centre, multiplex, game zone and bowling."

John Strachan, Cushman & Wakefield's Global Head of Retail, says: "Shopping is a global activity – from the main streets of Buenos Aires, to New York, Paris and New Delhi. Worldwide, the sector has seen a vibrant year, with new store openings, new formats, retailers entering new markets, in particular the emerging markets, and existing schemes being refurbished in more developed markets to cater for evolving consumer and occupier demand."