Retail Destination Europe 2013

Destination Europe 2013The 250 most renowned retailer brands and their presence across the key European cities

Foreword

Our 2009 report, Cross Border Retailing in Europe, explored the international expansion of retailers into country markets. This report examines, for the first time in detail, the expansion and presence of international retailers in the key, leading European retail cities.

Using our unrivalled knowledge and insight into retail markets, in conjunction with our network of local offices, we have analysed the presence of the 250 leading international retailers across Europe. Our research covers 55 key European markets, as identified within our 2011 Retail City Profiles, and two new retail markets in Eastern Europe (Belgrade and Bratislava).

International retailer ‘road mapping’ is becoming increasingly focussed on cities, as cross border barriers fall and as retailers chase diversification and growth. Whilst retail is becoming increasingly international, at the same time, retailers are under growing pressure to improve profitability and margins, which often means rationalising portfolios and sifting out non-performing stores. Expansion remains firmly on the agenda however. Factoring in the continuing challenging economic conditions for retailers across Europe (with little sign of the headwinds abating), and the structural changes to the industry resulting from the rise of multi-channel retailing, it is clear that any expansion needs to be careful, considered, and selective.

The relative attractiveness of cities to international retailers is based on a combination of numerous complex factors; market size, maturity of market, resilience and growth prospects, adjacencies and market familiarity, competition, real estate transparency and risk. This puts a premium on expert advice from professionals that live and breathe retail, and have access to the scale and breadth of data to enable them to provide accurate, holistic advice across Europe and beyond. Jones Lang LaSalle’s pan-European Retail team now consists of 1,000 dedicated retail staff, across 76 corporate offices in 31 countries. The goal of each is to provide a truly integrated service across the EMEA region, creating a competitive advantage for our clients, applied directly to their individual real estate decision-making needs, through the use of accurate data, market knowledge and forward-focused thinking.

We hope this report proves to be useful and insightful, be you retailer, investor, developer or landlord. Whilst retail undoubtedly faces challenges, clear new opportunities are still emerging.

James Dolphin James BrownHead of EMEA Head of EMEA Retail Retail Agency Consulting and Research

© Westfield Stratford City

1234567891011121314=14=16=16=1819=19=19=2223=23=2526=26=2829303132=32=34353637=37=37=404142434445=45=45=4849=49=51525354555657

• London has the highest presence of international retailers across Europe, followed by Paris, Moscow, Milan and Madrid.

• Italy, driven by luxury, is the largest exporter of retail fascias across the key retail cities in Europe, although the US is catching up fast.

• Zara, H&M and Mango have the greatest retailer coverage across Europe; Guess and Calzedonia are amongst the most expansive retailers.

• Paris commands the highest rents for international retailers, followed by Zurich and London; London tops the luxury rental table, followed by Paris and Moscow.

• London just edges out Paris at the top of the luxury retailer index, followed by the powerhouse Moscow, and Milan.

LondonParis

MoscowMilan

MadridRome

MunichSt Petersburg

PragueBarcelona

IstanbulBerlin

HamburgVienna

AmsterdamFrankfurt

AthensAntwerpWarsawLisbon

DüsseldorfBrussels

ZurichKiev

StockholmDublin

CologneValencia

BudapestBucharest

ZagrebLyon

CopenhagenManchester

BilbaoMarseille

TurinSeville

GlasgowStuttgart

BordeauxLille

LiverpoolBelgrade

OsloBirmingham

AnkaraBratislava

LuxembourgLeeds

HelsinkiCardiffBelfast

GothenburgNottingham

EdinburghMalmõ

0 50 100 150 200 250 Index

Jones Lang LaSalle Cross Border Retailer Index 2012Source: Jones Lang LaSalle

City Rank

| 4 | Jones Lang LaSalle

Rank City Index Mainstream Premium Luxury

London

Paris

Moscow

Milan

Madrid

Rome

Munich

St Petersburg

Prague

Barcelona

235

217

196

174

168

151

146

142

140

138

1

2

3

4

5

6

7

8

9

10

1.Five Fast Facts

Average

(Average representation = 100)

London is the most attractive location for international retailers, based on the presence of the top 250 international retailers in the key European retail markets. The UK’s capital is differentiated by its retail market size and maturity, as well as the high degree of market transparency, which together have resulted in a long history of success for international retailers. This year we have seen a number of new brands coming to London, from Rag and Bone and Victoria’s Secret from the US, to Bosideng from China. Major European cities are first ports of call for international retailers, and London, which is a particularly retail friendly market, leads for many as the springboard to Europe.

Other European cities successfully attracting international retailers include the core established retail markets of Paris, Milan, Madrid, Rome and Munich. A pick-up in retailer expansion has also been observed recently in other regional cities in Germany and the Benelux countries. After entering core major markets, retailers are selectively expanding into regional cities, then into growth markets. Borders are becoming less of a barrier, and retailers are capitalising on new growth opportunities.

We have also observed the burgeoning success of the emerging growth markets of Moscow, St Petersburg, Istanbul, Prague, Warsaw and Kiev. With a patchy and subdued growth outlook for some Western and Southern European markets, Eastern Europe provides some attractive expansion opportunities for retailers with established and successful retail businesses.

Further down the rankings, there are still plenty of strong retail markets across Europe, in particular some of the larger UK regional cities and the Scandinavian markets, which despite market opportunity remain relatively untapped from an international retailer perspective.

The trend towards increased penetration of international brands across Europe will accelerate over the coming years, as expansion strategies for many retailers focus on top tier cities. Retailers with a strong and translatable proposition should explore international expansion, whilst appreciating and mitigating the risks. For now, however, London remains number one, Paris is in second place, but Moscow in particular, is catching up fast.

London tops the international retailer league

© Jason Hawkes Destination Europe 2013 | 7 |

2.Retailer Presence

Core Retail Markets

The mature, established retail markets are generally the first port of call for retailers seeking international expansion. The map opposite shows the core retail markets (together with the growth markets, discussed later) across Western Europe, with the greatest international retailer appeal. The number in each circle represents the cross border retailer index ranking for each city, and the arrow represents current occupier demand. As we can see, demand for the right space in the right place remains resilient to cyclical headwinds. The following pages contain a brief description of each of the core retail markets of London, Paris, Milan, Madrid, Rome and Munich.

Europe’s Core and Growth Retail MarketsSource: Jones Lang LaSalle(Circle size is proportional to Cross Border Retailer Index)

London 1

Paris 2

Madrid 5 Rome 6

Milan 4

3 Moscow

8 St. Petersburg

11 Istanbul

19= Warsaw

9 Prague

Munich 7

Market

core

growth

| 8 | Jones Lang LaSalle Destination Europe 2013 | 9 |

23= Kiev

Demand

strong

steady

flat

London ranks as the most attractive location for international retailers in Europe. It attracts international brands for a number of reasons, including: size, maturity and transparency of the retail market, in addition to the track record of retailers who have successfully opened here. The four main shopping areas, Oxford Street, Regent Street, Bond Street and Covent Garden, collectively form the largest concentration of retail in Europe. The opening of the two Westfield shopping centres has also been the catalyst for a number of new entrants into the London market, which continues to dominate the UK retail market, driven in part by tourist spend. London is a retail friendly market and will continue to act as an entry point to Europe for international brands. This year we have seen a number of new brands coming to London, from Rag and Bone and Victoria’s Secret from the US, to Bosideng from China.

Paris is the second most attractive location for international retailers in Europe. Paris is one of the world’s leading tourist destinations and, along with London, one of the strongest global retail locations. It continues to attract the biggest international and national brands that inevitably look to the city to open flagship stores, in particular the premium and luxury brands. Both shopping centres and high streets are attractive to the city shoppers, with centrally-located Parisians preferring areas such as the Champs-Elysées, Opéra and Boulevard Haussmann, while those living on the periphery tend to migrate to suburban shopping centres Rosny 2 or Velizy 2. The Champs-Élysées, the most expensive retail location in France, has recently welcomed such new tenants as Abercrombie & Fitch, Marks & Spencer, and Banana Republic. Other recent new entrants include Calzedonia, Forever 21, Aldo and Intimissimi.

LondonRANK 1


ParisRANK 2

© Westfield Stratford City

Munich ranks as the seventh most attractive location for international retailers in Europe. The Bavarian state capital is the top retail location in Germany, and retailers are queuing up for units in good positions. Retail spend per capita in Munich is among the highest in Europe, and a strong tourist market also helps to buoy the local economy. Kaufingerstrasse, Neuhauser Strasse and the area around Marienplatz are the prime high street locations, with the best performing centrally-located scheme being Fünf Höfe. Maximilianstrasse is the home to most luxury retailers in the city. Recent international retailer market entrants include Tory Burch and Woolrich.

Rome is the sixth most attractive location for international retailers in Europe. The Italian capital attracts millions of tourists every year, and the retail market has been dynamic in recent years. Several large out-of-town shopping centres have opened recently, but the high street has maintained its pre-eminence for both local and international shoppers. The areas around Piazza di Spagna and Piazza del Popolo in the old town are traditionally the most sought after. Via Condotti and Via del Babuino are also considered prime locations. In terms of shopping centres, Porta di Roma (North Rome) and Roma Est (East) remain the best performing schemes and each feature some important flagship stores. Recent international retailer market entrants include Superdry and Deichmann.

RomeRANK 6


MunichRANK 7

Milan is the fourth most attractive location for international retailers in Europe, and is the industrial, commercial and financial capital of Italy, with an economy dominated by the service sector. Milan is also one of the world’s most famous fashion centres, and is a particularly strong premium and luxury retailer market. The city centre boasts a large retail floor space, although there are no shopping centres in the central areas of the city. The city centre comprises two distinct but very affluent shopping areas; the first, with a very upmarket emphasis, is located around Via Montenapoleone, the second is the more mainstream area around the Piazza del Duomo, including Vittorio Emanuele II. Recent entrants to the market include Cos, Agent Provocateur and Just Cavalli.

Madrid ranks as the fifth most attractive location for international retailers in Europe. Being the capital and largest city in Spain, Madrid draws upon a large consumer base, which is among the most affluent in the country. It is also a transport hub, and as such a magnet for tourist and business travellers. The Madrid retail market appeals to a wide audience and many of the top fashion brands have their flagship stores here. Preciados is the prime high street, and the most famous retail location in Spain. The main city centre shopping centres are La Vaguada and Parquesur. The stretch of Ortega y Gasset between Serrano and Velazquez Street is the prime area for luxury brands. Recent international retailer market entrants include Tiger of Sweden, Hollister, Apple and Agent Provocateur.

MilanRANK 4

MadridRANK 5

Power Retail Growth Markets

With current headwinds across most European markets, opportunities for expansion into territories with stronger growth prospects are becoming increasingly attractive. Once established in multiple markets, retailers can benefit from reduced risk associated with being reliant on one or fewer geographies. In some instances, expansion is about reducing the risk of over-reliance on a dominant domestic market, for others it is about growth.

Whilst the Far East is clearly a key growth market, attractive opportunities for international expansion exist closer to home, in Central and Eastern Europe in particular. Central and Eastern Europe’s growing importance as a global retail market is demonstrated by the fact that it now has more cities in the top 30 retail locations than Southern Europe.

Current hotspot retail markets in Central and Eastern Europe are the growth markets of Russia (Moscow and St Petersburg) and Turkey (Istanbul), in addition to the capital cities of the Central European powerhouse economies (Prague and Warsaw) and the emerging retail market in Kiev. These markets, as shown opposite, are already successfully attracting significant numbers of international retailers, either through franchise or company-owned stores. They still have scope for further expansion, however, due to the market size, and/or positive retail sales outlook.

The size of bubble in the graph opposite (and throughout the report) represents the size of the country retail market. As such, it provides an indication of the wider market opportunity presented by entry into each individual country market.

Key: Country Level Retail Sales (2011)

Cross Border Retailer Index Rank vs. Retail Sales Growth ForecastSource: Jones Lang LaSalle, Oxford Economics (Belgrade data unavailable)

Under €50bn

| 14 | Jones Lang LaSalle -20 -10 0 10 20 30

Retail Sales Growth Forecast (5 yr %) Cros

s Bor

der R

etaile

r Ind

ex R

ankin

g

€50bn - €100bn

€100bn - €200bn

€200bn - €300bn

€300bn - €400bn

Over €400bn

Malmõ

Ankara

LuxembourgLeedsHelsinki

CardiffBelfast

Nottingham Edinburgh

Gothenburg

Glasgow

StuttgartBordeaux

Lille

OsloBirmingham

Bilbao

Liverpool

Seville Turin

Cologne

Valencia

BucharestBudapest

Zagreb

Lyon

Copenhagen Manchester

Marseille

Hamburg

Athens

Amsterdam

Frankfurt

Vienna

Antwerp

LisbonDüsseldorf

BrusselsZurich

StockholmDublin

LondonParisMilan

MunichRome

Madrid

Barcelona

Berlin

Moscow

St PetersburgPrague

Istanbul

Warsaw

Kiev

Bratislava

Key:growth markets

Moscow ranks as the third most attractive location for international retailers in Europe. Russia is predicted to become Europe’s leading retail market, with disposable incomes increasing rapidly and a burgeoning middle class. Moscow’s high overall ranking in our Index is due mainly to the high penetration of mass retailers in the city. There are over 80 shopping centres in the Moscow region (with a further estimated 320,000 sq m in the pipeline), in addition to some prominent areas of high street retail. Tretyakovsky Proezd is the main luxury street, whilst the GUM and TSUM areas, in addition to Petrovka and Stoleshnikov Lane, also host luxury brands. The main streets for local and international mass market brands are Tverskaya, Novy and Stary Arbat. Recent entrants into the market include; American Eagle, Victoria’s Secret, American Apparel, Ben Sherman, Koton, La Senza, Mac Cosmetics, Marlboro Classics, Okaidi and Warehouse.

St Petersburg is the eighth most attractive location for international retailers in Europe. St Petersburg is the second largest city in Russia, and a major financial and industrial centre. Consumer spend is divided between out-of-town regional shopping centres and the city centre, which is skewed towards mass-market and premium brands. Nevskiy Prospect is the historic centre of the city and the most popular street, providing a large variety of mass market shops. Premium brands are found mainly in multi-brand chain stores. 2010 brought long-awaited large new schemes to the market, Galeria and Nevskiy Centre, and there is a further estimated 425,000 sq m in the pipeline. Recent entrants into the market include Chanel, Guess, Mac Cosmetics, Marlboro Classics, Sephora and Trussardi Jeans.

MoscowRANK 3

St PetersburgRANK 8


Istanbul is the eleventh most attractive location for international retailers in Europe. Turkey is the seventh largest organised retail market in Europe, with a total leasable area of 8.3 million sq m across 332 shopping centres. Approximately 2.6 million sq m of leasable space is currently under construction, with Istanbul accounting for almost half of this total. The huge market of approximately 13.3 million consumers in Istanbul is viewed by many retailers as the perfect gateway to the Middle East and Caucasus region. Istanbul’s retail market is revolutionising itself at great speed, with significant quantities of modern shopping centre stock coming online. The importance of shopping centres in the market is growing, with the likes of Forum Istanbul and Istinye Park trading particularly well. This will be further fuelled by the huge development pipeline, and in particular the imminent opening of several landmark schemes, including the Zorlu Center and Emaar’s Boulevardi. Istanbul’s retail culture is still mostly dominated by the high street, however, with Istiklal Street the dominant mass market location on the European side, along with Nişantaşi district, which caters for luxury brands. On the Asian side, Bagdat Street is the most well-known and popular area, featuring a range of local and international brands. Recent entrants into the market include Aeropostale, Carluccio’s, Zadig&Voltaire, Promod and Gymboree.

Prague ranks as the ninth most attractive location for international retailers in Europe. The Czech Republic capital’s retail market is dominated by shopping centres. Nový Smíchov shopping centre is located on one of the busiest transport hubs in Prague, helping make it the best performing centre in the city. The prime high street locations are concentrated in two places; the area around Na Příkopě provides the mass retail offer, and includes four shopping galleries. Pařížská Street is home to luxury brands such as Louis Vuitton and Hermès, and offers a smaller number of shops in a more ‘intimate’ atmosphere. Recent entrants into the market include Carpisa, Aldo, T.M. Lewin, Desigual, Tiffany & Co, Jimmy Choo and Parfois.

PragueRANK 9

IstanbulRANK 11

Other Hotspot Retail Markets

In addition to the fast-moving growth markets, there are a number of more established retail markets that have attracted retailers in the last 12 months, and which benefit from a relatively strong retail sales growth outlook. In particular, the Benelux cities (Brussels, Amsterdam, Antwerp), have seen some of the strongest international retailer interest in the last 12 months. And the regional German cities of Frankfurt and Düsseldorf, together with Vienna, are all established, affluent markets which have been successful in attracting international retailers from the first-stop core cities, on the next phase of their expansion.

Further down the rankings, there are numerous retail markets that are relatively untapped from an international retailer perspective, but which are forecast to benefit from above average retail sales growth. Whilst relatively small in terms of overall market size, the affluent Scandinavian markets of Malmõ, Gothenburg and Helsinki, in addition to some of the larger UK regional cities of Edinburgh, Nottingham, Belfast and Cardiff, should be on the radar of expansive international retailers going forward.

Warsaw ranks as the equal nineteenth most attractive location for international retailers in Europe. The retail landscape in the Polish capital is dominated by shopping centres, a reflection of the shopping patterns of Polish consumers, who prefer covered schemes to exposed streets. Nevertheless, high street locations are gradually gaining in importance and capturing retailers’ interest. The prime high street locations are concentrated in Marszałkowska Street, along with the renovated Wars and Sawa Junior department stores. This area is the most sought-after pitch for popular mass market brands. Warsaw’s shopping centres continue to perform strongly, in particular the Zlote Tarasy scheme. Recent entrants into the market include Gap, Cos, American Eagle, Victoria’s Secret, Bath & Bodyworks, Carpisa and Marco Polo.

The Ukrainian capital is the equal twenty-third most attractive location for international retailers in Europe. After a long period of uncertainty resulting from the financial crisis and political instability, Kiev’s retail market activity has picked up markedly. The recent European Football Championships stimulated significant infrastructure and commercial real estate development, but Kiev still lags behind most European capitals in terms of quality of shopping centre stock and provision per capita. The main shopping streets in Kiev include Kreschatik, Krasnoarmeyskaya and Sagaidachnogo – home to the inter-national brands. Upmarket brands traditionally prefer the prestigious area around Passage and Gorodetskogo. There are several shopping centres in the city centre with quality tenant-mixes, including Globus and Mandarin Plaza. The re-constructed TSUM is expected to be opened on Kreschatik St in 2015. Recent entrants into the market include Diesel, Oviesse, Valentino, Prada, Dolce & Gabbana, Mac Cosmetics and Trussardi Jeans.


WarsawRANK 19=

KievRANK 23=

1000 2000 3000 4000 5000 6000 7000 8000

240

220

200

180

160

140

120

100

80

60

40International Prime Rent (€/sq m/year)

Cros

s Bor

der R

etaile

r Ind

ex

Zurich

Paris

London

Moscow

MilanMadrid

RomeMunich

St Petersburg

Istanbul BarcelonaBerlin

Frankfurt

Hamburg

Cologne

Düsseldorf

AmsterdamAthens

LisbonBrusselsWarsaw

Antwerp

Kiev

Stuttgart

Malmõ

Gothenburg

Ankara

BilbaoSeville

Leeds

EdinburghNottingham

Befast

Liverpool

Birmingham

Stockholm

Bucharest

Budapest

ZagrebValencia

Dublin

Copenhagen

Manchester

Oslo

Prague

Amsterdam


3.Rental Analysis

Cross Border Retailer Index vs. International Prime RentSource: Jones Lang LaSalle

Under €50bn €50bn - €100bn

€100bn - €200bn

€200bn - €300bn

€300bn - €400bn

Over €400bn

Key: Country Level Retail Sales (2011)

Lyon

Cardiff

Luxembourg Helsinki

Turin

Glasgow / Bordeaux / Lille / Marseille

Retailer appetite for the best space across Europe remains strong. Many top-tier retailers will accept flagship space (often in the form of brand pavilions, which are effectively showroom style stores that showcase the brand) in iconic locations, and nothing less. This is maintaining or, in some instances, putting upward pressure on rents in super-prime locations, while more secondary locations are seeing higher vacancies and reduced demand for space.

Looking at the rental levels commanded by international retailers (luxury rents are explored later in the report), there is a clear correlation between the number of international retailers present in a market, and the prime rents paid by international retailers, as demonstrated opposite.

Bratislava Belgrade


Paris, Zurich and London clearly command the highest international retailer rents for prime, mainstream retail space, on the Avenue des Champs-Élysées, Bahnhofstraße and Oxford Street re-spectively. The core cities of Munich and Milan, as well as the growth powerhouse market of Moscow, are also commanding high rents, and lead the following pack.

The graph on the previous page also clearly identifies the regional clusters, whereby UK regional, Scandinavian, French regional, German, Benelux, Eastern European and Southern European cities are generally grouped together. Whilst not surprising, this illustrates that there are useful reference points and commonalities between cities in the same country or region.

The maturity of the retail market clearly influences prime rental levels. The growth markets of Istanbul, St Petersburg, Warsaw, Prague and Kiev are all commanding relatively low rental levels, relative to their international retailer presence. These markets are also forecast to benefit from some of the strongest medium-term retail sales growth in Europe. Clearly as these markets mature, retail sales grow, and the number of international retailers present increases, rents are likely to rise further.

Paris commands top international retailer rents

Retail Sales Growth Forecast vs. International Prime RentSource: Jones Lang LaSalle, Oxford Economics (Belgrade data unavailable)

Paris

London

Zurich

MoscowAnkara

WarsawKiev

Lisbon

Bilbao

Athens

Seville

Milan

Hamburg

Munich

Cologne

Bucharest

Oslo

1000 2000 3000 4000 5000 6000 7000 8000

25

20

15

10

5

0

-5

-10

-15

-20International Prime Rent (€/sq m/year)

Retai

l Sale

s Gro

wth F

orec

ast (

5 yr %

)

Liverpool

ZagrebAntwerp Brussels

Düsseldorf

Malmõ

Stockholm

Prague

Barcelona

DublinValencia

Turin Rome

Madrid

Frankfurt

Gothenburg

BerlinStuttgart

Vienna

Leeds

CopenhagenMarseille

Bordeaux

AmsterdamLyon

Belfast Budapest

NottinghamEdinburgh

Istanbul

Glasgow

Manchester

BirminghamLuxembourg

Helsinki CardiffLille

St Petersburg

Key:core marketsgrowth markets

Bratislava

Italy tops the retailer exporter league

Looking at the country of origin of international retailers, as we can see in the map overleaf, Italy is the number one exporter of retail fascias, accounting for 17% of total international retailer presence in the 57 European markets covered. Benetton and Diesel are the highest placed Italian retailers, with strong coverage across the 57 markets. However, it is the strength of the Italian Luxury retailers which accounts for Italy’s position at the top of the rankings. Max Mara is the most prolific luxury retailer in our analysis, with presence in 75% of the markets covered.

Italy’s supremacy, however, is under threat from across the Atlantic. The US is currently in second place, accounting for 16% of total international retailer presence, but is rising rapidly as American retailers continue to selectively expand across Europe. Long established operators such as Starbucks continue their expansion and a variety of newer entrants to the market, including most recently, Victoria’s Secret are exploring new markets.

The UK ranks third, accounting for 13% of all international retailer presence. Whilst London is the largest importer of international brands, the UK is also successfully exporting brands globally. Retailers such as The Body Shop, Lush, Burberry, Marks & Spencer, Debenhams, Primark, Superdry, and Topshop are actively, albeit selectively, expanding into new territories.

The top three exporter countries are followed closely by Germany, also accounting for 13% of the market, driven by its strength in mass market retailing, France with 12%, driven by Luxury, in particular through the large holding companies of Pinault-Printemps-Redoute (PPR) and LVMH, and Spain with 10%, driven mainly by the reach and coverage of Mango and the Inditex brands.

We have also analysed the main countries targeted by the top six exporter countries. Not surprisingly, it is generally a question of neighbouring, familiar markets being the favoured target countries. The Italian brands have strong presence in the German and Spanish cities, for instance, the US brands initially favour the UK market, and London specifically, as their springboard into Europe. UK retailers have a strong presence in Germany and increasingly in Russia, whilst French retailers target the neighbouring German cities, and Spanish retailers are heavily represented in French cities.


4.Retailer Country

of Origin

SPAIN

Retailer RankZara 1st

Mango 3rd =Massimo Dutti 11th =Bershka 31st =Desigual 31st =

ITALY

Retailer RankBenetton 3rd =Diesel 11th =Max Mara 13th =Geox 16th =Emporio Armani 37th =

FRANCE

Retailer RankLouis Vuitton 19th =Petit Bateau 37th =Escada 37th =Cartier 47th =Hermès 53th =

GERMANY

Retailer RankAdidas 16th =Hugo Boss 19th =New Yorker 24th =Deichmann 27th =Puma 27th =

UK

Retailer RankThe Body Shop 3rd =Lush 6th

Burberry 31st =Karen Millen 37th =Marks & Spencer 64th =

Retailer Country of OriginSource: Jones Lang LaSalle

1st

6th

5th

3rd4th


USA

Retailer RankTimberland 7th =Tommy Hilfiger 7th =Foot Locker 9th =Claire’s 16th =Starbucks 19th =

2nd

Key:

Rank – Retailer Coverage Ranking (1-250)

Zara tops the coverage league

Zara is the only retailer with 100% coverage across all the key European markets reviewed, and therefore tops the retailer coverage league. Zara’s Spanish owner Inditex group also owns the Massimo Dutti premium clothing brand, which ranks equal 11th in the retailer coverage list. In total, the Inditex Group operates 5,693 stores across the world, and opened 166 stores in the first six months of 2012 alone.

Swedish retailer, H&M, is second on the list, with presence in 96% of markets covered. Despite its first international expansion taking place nearly 50 years ago, pan-European coverage has only really materialised in the last five to ten years. With plans to open stores in Mexico, Malaysia and Kuwait over the next eighteen months, H&M clearly has its sights on global coverage.

Rival UK cosmetics retailers, The Body Shop (equal 3rd) and Lush (6th), are closely matched in terms of coverage of the key European markets. Both use a franchise model, which provides retailers with a quick and low risk means of increasing coverage. In addition, the need for small retail units, combined with relatively affordable products, allows both retailers to export their brand successfully with relative ease across many markets.

Not surprisingly, Starbucks is the only Food and Beverage retailer to make the Top 20 of the coverage table (equal 19th). Further expansion looks likely, as plans to open 300 new stores across the EMEA region in the next five years have been widely reported.

The Top 20 is dominated by retailers we define as mainstream, accounting for 12 out of the Top 20 retailers by total coverage. There are six premium retailers within the Top 20, with US retailers Tommy Hilfiger and Timberland ranking highest (equal 7th), both with over 80% coverage of Europe’s key markets. Italy’s Max Mara (equal 13th) and France’s Louis Vuitton (equal 19th) are the only Luxury brands to make it into the Top 20.

ZaraH&M

The Body ShopBenetton

MangoLush

Tommy HilfigerTimberland

Foot LockerG-StarDiesel

Massimo DuttiMax MaraJack Jones

GantGeox

Claire’sAdidas

StarbucksLouis Vuitton

Hugo Boss60 65 70 75 80 85 90 95 100

Top 20 Retailers % Coverage of Europe’s Key MarketsSource: Jones Lang LaSalle


Mainstream Premium Luxury

5.Extensive and

Expansive Retailers123=3=3=67=7=91011=11=13=13=13=16=16=16=19=19=19=

City Rank

Significant expansion opportunities remain…

Perhaps surprisingly, only nine retailers have more than 80% coverage across Europe’s key markets. For the majority of international retailers, therefore, significant expansion opportunities remain. In fact, over 100 retailers have presence in less than 20% of markets covered. For these retailers, over 80% of the key markets analysed across Europe remain untapped.

Amongst those retailers which are currently in expansive mode are North American retailers, Guess, Forever 21, Apple, Starbucks and Mac Cosmetics, in addition to European players Michael Kors and Calzedonia.

…although challenges to overcome

There is a great temptation to access the huge pool of potential new customers in foreign markets, in particular for retailers that perhaps are not seeing any growth or even struggling in their domestic markets. Expansion for these reasons very rarely works, and it is important to have a strong, well-run business, before dedicating the extensive time and resources needed for expansion.

6.Luxury


One of the largest tests for international retailers looking to grow in Europe’s key markets, is the risk that the brand or product does not translate across borders. Unfortunately, there are numerous examples of retailers that have endeavoured to break into a new market later to withdraw. Market testing is crucial, and one of the principal advantages of e-commerce is the ability to build brand awareness overseas prior to arrival, of which there are many examples.

E-commerce, and social media in particular are facilitating and accelerating the internationalisation of fashion trends in particular. Previously retailers could not transfer products as easily, as they were historically designed for targeting domestic markets. This generally left the retailer with the choice to either accept lower sales densities in overseas markets or to design and source separate ranges. There are now more than 1 billion consumers using Facebook each month around the world. Consumers everywhere, therefore, are increasingly exposed to the same fashion and cultural influences.

The second major challenge lies in understanding market differences. The complexities of local market fundamentals exist across all retail markets, irrespective of geography. In this context, local expertise or partnering is paramount in order to try and avoid the pitfalls, in terms of legislation, site selection and lease terms.

LondonParis

MoscowMilan

MadridRome

MunichIstanbul

BarcelonaZurich

St PetersburgKiev

HamburgPragueAthens

FrankfurtBerlin

ViennaBrussels

DüsseldorfAmsterdam

LisbonWarsaw

AntwerpValencia

BudapestCopenhagen

StockholmBucharest

CologneTurin

BilbaoBordeaux

LyonSeville

LilleStuttgart

ZagrebLuxembourgManchester

MarseilleOslo

BelgradeDublin

HelsinkiAnkara

BirminghamEdinburgh

GlasgowLeeds

LiverpoolNottingham

BelfastBratislava

CardiffGothenburg

Malmõ

0 50 100 150 200 250 300 350 400 Index

The rise and rise of luxury

The global luxury market has remained relatively sheltered from the economic crisis. Despite a short period of slower sales in 2009, the market bounced back in 2010 and continued to flourish throughout 2011 and into 2012. Whilst economic uncertainty has deterred most global middle-income shoppers, affluent Western shoppers have flocked back to the luxury brands, which together with economic growth in the BRIC nations and an insatiable appetite for luxury goods in the Far East, has driven growth in the luxury goods market globally.

According to retail expert Verdict, the global luxury goods market witnessed strong growth to 2010, and is currently valued at €320bn. Verdict’s recent forecasts suggest that this expansionary trend is set to continue, with estimates valuing the market at around €390bn by 2015. Europe remains the largest luxury goods market, with over €90bn being spent on luxury branded products in 2010. However, Asia Pacific is the only market not to have suffered a drop in luxury sales in 2009, and is set to experience unprecedented growth over the next five years, rapidly closing in on Europe’s number one position. By 2015, Asia Pacific’s luxury goods market is expected to be valued at €112bn, up 92% on today’s valuation. The growing wealth creation in the Asia Pacific region, most notably throughout China, and the sheer volume and size of its densely populated cities, has made it a very attractive destination for luxury retailers.

The Global Luxury Houses have emerged from the financial crisis much faster and stronger than most businesses. Burberry, Gucci Group, Hermès, LVMH, Polo Ralph Lauren and Richemont have all revealed strong sales growth, with some recording record sales in the last year. Expanding store networks have driven growth, particularly across the Asia Pacific region, where retail operations typically outperform the rest of the business elsewhere in the world. But despite this rapidly expanding region, Europe remains a core, mature and key market for the international luxury retail brands.


Cross Border Luxury Retailer Index 2012Source: Jones Lang LaSalle

(Average representation = 100)

123456789=9=111213=13=15=15=17=17=19=19=21222324=24=26=26=26=29303132=32=32=32=36=36=36=39=39=39=39=43=43=43=46=46=46=46=50=50=50=53=53=53=56=56=

City Rank

400

350

300

250

200

150

100

50

0

1000 2000 3000 4000 5000 6000 7000 8000 9000

Gro

wth

Lux

ury

Mar

kets

Esta

blis

hed

Luxu

ry M

arke

tsEm

ergi

ng L

uxur

y M

arke

ts

Prime Rent Luxury Districts (€/sq m/year)

Cros

s Bor

der L

uxur

y Reta

iler I

ndex

Cross Border Luxury Retailer Index vs Prime Rent (Luxury District)Source: Jones Lang LaSalle

London pips Paris to the post

In 2011, we published a report, ‘Glitter & glamour shining brightly’, which analysed the 100 most re-nowned luxury brands, and their presence in Europe’s top retail centres. As part of this research, we have revisited this work, expanding the number of markets covered in the analysis to the 57 key retail markets covered in this report.

In our 2012 report, London leads the rankings in terms of luxury brand presence, marginally ahead of Paris, befitting their status as the two most renowned retail locations in Europe. The growth market of Moscow lies in third position, as in the overall index, followed by Milan, Madrid, Rome and Munich. These markets represent the mature luxury retail markets across Europe, each with a critical mass of international luxury retailers which attract both domestic and international consumers seeking high-end shopping experiences.


London

Paris

Moscow

Milan

Rome

Madrid

Munich

Zurich

Vienna

Istanbul

Barcelona

Hamburg Frankfurt

Berlin Düsseldorf

St Petersburg

Prague

Brussels

AmsterdamLisbon

Kiev

Athens

Valencia

Budapest

Warsaw

Zagreb

Ankara

Bucharest

Seville

Antwerp

CopenhagenStockholm

TurinLyon

Stuttgart

Luxembourg

BelfastCardiffMalmõ

Gothenburg

Liverpool

Bilbao

HelsinkiMarseille

Edinburgh

Bordeaux

Cologne

LyonOslo Dublin

BratislavaBelgrade

Lille

NottinghamGlasgow

Leeds

Italian luxury brand, Max Mara, has the highest presence amongst luxury retailers, with 75% coverage of all markets. Louis Vuitton is the only other luxury retailer with over 70% coverage. Other luxury retailers with over 50% coverage are; Burberry, Mont Blanc, Emporio Armani, Cartier, Hermès and Gucci. Expansive luxury retailers include Tory Burch, Bottega Veneta and Mulberry.

New Bond Street: from prime to über-prime

We have also analysed rents commanded by luxury retailers across the 57 markets covered. New Bond Street in London tops the rental league, with headline rents of over €8,300 per sq m per year, following recent growth this year due to pent up demand for space finally being realised. Avenue Montaigne in Paris lies in second place, commanding rents of €7,500 per sq m per year. Despite the relatively small market size in terms of international retailer presence, Bahnhofstraße in Zurich commands the third highest rents in Europe, at just over €7,000 per sq m per year. This is followed by the Italian luxury shopping locations of Via Condotti in Rome and Via Montenapoleone in Milan, both at €6,700 per sq m per year and Stoleshinkov Lane in Moscow, commanding €6,000 per sq m per year.

There is a clear gap between the rental levels in the top six luxury retail locations, and the rest, which are led by Vienna and the German cities. On this basis, Madrid (and to a slightly lesser extent Barcelona) and the growth markets of Istanbul and St Petersburg, all with established luxury retail markets, currently appear to provide luxury retailers with relatively good value for money.

Max MaraLouis Vuitton

BurberryMont Blanc

Emporio ArmaniCartier

HermèsGucciBally

ErmenegildoGiorgio Armani

BulgariSalvatore

LongchampChopard

ChanelPrada

Bottega VenetaTiffany & Co

Tod’s

30 40 50 60 70 80

Top 20 Luxury Retailers % Coverage of Europe’s Key MarketsSource: Jones Lang LaSalle


Max Mara is the most prevalent luxury retailer

1234=4=67=7=9101112131415=15=17=17=19=19=

City Rank

Looking ahead, the numerous challenges facing retailers operating internationally will persist. As will the ever changing competitive environment that forces retailers to consider shorter-term, domestic opportunities with longer-term opportunities in developing markets. The top retailers in the next decade are likely to be those that focus on a portfolio of markets, with different levels of risk (core and growth), at different levels of maturity and with distinct consumer profiles.

There are undoubtedly significant expansion opportunities for retailers across Europe’s key city markets. The key is for retailers to fully understand and maximise current store portfolios, before assessing the detailed risks and benefits associated with international expansion. And above all, to partner with knowledge and experience to achieve strategic, profitable and long-lasting growth.

What is becoming increasingly clear, is that borders are becoming irrelevant, and the internationalisation of retail is gaining unstoppable momentum.


7.Conclusion

Methodology The analysis looks at the presence of brands in the specific cities, as well as retailers which are opening imminently, focusing solely on retailers’ own shop networks, including franchises. Retailer concessions are excluded as are second-line brands, multi-label stores and branded shops within department stores, due to the lack of transparency. Geographically the study looks at the downtown area of each individual city, concentrating on its well-known shopping areas, supplemented by surrounding areas and out of town malls in prime locations.

Prime rents represent the top open-market rent that could be expected to be paid by international and/or luxury retailers for a notional unit of the highest quality and specification, in the most prime location in a market.

Contact

James DolphinHead of EMEA Retail Agency+44 (0)7921 944 [email protected] James BrownHead of EMEA Retail Research & Consulting+44 (0)7860 408 [email protected]

Colin BurnetAssociate Director, EMEA Retail Research & Consulting+44 (0)203 147 [email protected]

www.joneslanglasalle.eu

Copyright (c) Jones Lang LaSalle IP, INC 2012No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

Business

Retail Destination Europe 2013