Destination Nordics 2015Untapped region offering opportunities for growth and diversification

Retail Intelligence

Foreword

Welcome to our first Destination Nordics report. At the end of last year we published our latest edition of Destination Europe where we explored the expansion and presence of 250 international retailers in Europe’s leading retail cities. In this report we focus specifically on international retailer presence and expansion in the Nordic retail markets of Copenhagen, Helsinki and Oslo as well as the Swedish cities Stockholm, Gothenburg and Malmö. We will also explore the key drivers behind the increasing success achieved by both international retailers and investors across the region.

Retailers have become more positive about their expansion plans as economic conditions across Europe continue to improve. The retail sales growth outlook for Europe overall is now the brightest since the start of the decade. However, retail markets are undergoing structural change, driven by the rise of multi-channel retail and Europe’s multi-

speed economic recovery. It is clear that retailer expansion needs to remain careful, considered and selective.

For international retailers looking for growth and diversification, the key Nordic retail markets are an increasingly attractive destination for expansion. Oslo, Copenhagen, Helsinki as well as the Swedish cities, Stockholm, Gothenburg and Malmö are among Europe’s most affluent cities. A high degree of market maturity, resilience and growth prospects as well as real estate transparency and low risk add to their appeal. Over the past couple of years, we have seen that an increasing number of international retailers are overcoming barriers, such as distribution of goods or the use of different local currencies, to enter the Nordics. For some retailers the use of different currencies has become a welcome diversification of risk with regards to their operational income.

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Overall, the Nordic retail markets are on the rise. Whilst international brand penetration in these markets is still relatively low in comparison with other key European markets, new fashion entrants have been embraced by local shoppers, resulting in healthy sales. We are also witnessing some great examples of innovation in the region, including shopping centre Mood Stockholm, has become a popular destination thanks to its sophisticated food and beverage offer. The opening of Emporia Shopping Centre in Malmö has been a true magnet for new retail brands, including Apple and Hollister Co.; the anticipated opening of Mall of Scandinavia is likely to raise the bar even higher.

International retailers looking to expand may find the Nordic retail markets high on their radar thanks to their attractive characteristics. Whilst the opportunity is clear at a macro level, understanding the idiosyncrasies of each market is key. Success ultimately relies on finding the right space, in the right place on the right

terms. JLL is proud to have helped various retailers including Louis Vuitton, Michael Kors, Boggi and Superdry to expand across the Nordics.

Our pan-European Retail team now consists of 1,000 dedicated retail staff, across 70 corporate offices in 29 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, whether you are a retailer, investor, developer or landlord. Whilst retail undoubtedly faces challenges, we see significant opportunities arising across the Nordic region.

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Contents

1 Fast Facts 6

2 Retailer Presence 8

3 Rental Analysis 18

4 Extensive and Expansive Retailers 20

5 Food & Beverage 24

6 Luxury 28

7 Conclusion 34

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• International retailers continue to selectively expand in the Nordic region, at a slightly faster rate than Europe’s key cities at an aggregated level.

• Stockholm is the springboard for retailers into the region and has the highest presence of international retailers compared to its Nordic peers, followed by Copenhagen, Oslo, Malmö, Gothenburg and finally Helsinki.

• The UK, driven by expanding mass market and premium retail brands, is the largest exporter of cross border retail fascias across the key Nordic retail markets ahead of the USA, Germany and Sweden.

• Copenhagen edges out Stockholm in terms of the number of luxury retailers present in the city; Oslo, Helsinki and Malmö are next in the rankings behind these two luxury hotspots.

• Copenhagen commands the highest rents for both international and luxury retailers, followed by Oslo and Helsinki. Stockholm is forecast to see the highest rental growth until 2017.

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Rank City Index Mainstream Premium Luxury

Stockholm

Copenhagen

Oslo

Malmö

Gothenburg

Helsinki

99

83

63

54

54

53

1

2

3

4

5

6

1.Fast Facts

Source: JLL

Key Key European Retail Cities Key Nordic Cities

123456789101112=12=1415=15=1718=18=202122232425=25=272829303132=32=343536=36=38=38=4041=41=4344=44=4647=47=4950515253=53=555657

LondonParis

MoscowMilan

MadridRome

IstanbulMunich

BerlinBarcelona

AmsterdamHamburg

St PetersburgPrague

WarsawKiev

ViennaBrussels

DüsseldorfFrankfurtAntwerp

ZurichLisbonDublin

StockholmAthens

CologneBudapest

LyonBucharest

ValenciaCopenhagen

TurinManchester

MarseilleBratislavaGlasgow

BordeauxLille

BelgradeLuxembourg

StuttgartCardiff

LiverpoolZagrebAnkaraBilbaoLeedsOslo

SevilleBirmingham

EdinburghGothenburg

MalmøHelsinki

NottinghamBelfast

0 50 100 150 200 250 Index

JLL Cross Border Retailer Attractiveness Index 2015

City Rank

Average

Source: JLL

(Average representation = 100)

Following the success of our Destination Europe 2015 report, where we examined the presence of 250 top international retailers across Europe’s key retail markets, we have focussed specifically in this report on the Nordic cities of Copenhagen, Helsinki, Gothenburg, Malmö, Oslo and Stockholm.

International retailers have set their sights on the key Nordic retail markets thanks to their increasing appeal. The Nordic cities stand out thanks to high levels of affluence (p.10) and a bright retail sales outlook, driven by economic growth and rising populations. Denmark, Finland, Norway and Sweden have a young population, particularly in comparison with West European countries. Circa 30% of the total population in the Nordic region is below 25 years of age. Many young shoppers are fashion orientated, aspirational and embrace innovation. As Nordic citizens are well travelled, they are familiar with international retailers and welcome new brands into their cities. For an increasing number of operators, the Nordic opportunity outweighs potential barriers such as different currencies or distribution of goods.

Stockholm ranks as the most attractive location for international retailers in the Nordic region, thanks to its attractive market size and an affluent fashion orientated consumer base. Healthy retail sales growth provides an additional boost to its overall appeal. Stockholm is home to various attractive brands, including Michael Kors, Apple, Superdry and Victoria’s Secret, as well as luxury retail brands Louis Vuitton and Gucci, amongst others.

Copenhagen currently ranks as the second most attractive city in the Nordic region. Upmarket retail brands in particular have been actively acquiring high quality retail space in the city. Whilst Copenhagen houses a lower number of international retailers than Stockholm, the city stands out thanks to its large share of premium and luxury retail brands. Mac Cosmetics, Zadig & Voltaire, Michael Kors and Stella McCartney are amongst the high-end brands that have opened stores in the past two years.

Oslo ranks third in terms of international retailer attractiveness. As the most affluent market in the Nordic region, the city has welcomed the largest number of international retailers over the past two years.

Stockholm and Copenhagen compete for top spot as the Nordics’ most attractive destination

2.Retailer Presence

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Malmö is now on a par with Gothenburg in terms of cross border retailer attractiveness, as the opening of Emporia Shopping Centre in 2012 boosted the number of international retailers present in the market, including brands such as Apple, Desigual, Hollister Co. and Oasis.

Helsinki is currently the most untapped retail market in the Nordic region from an international retailer perspective. Whilst retailers such as Starbucks, Habitat, XXL, Marks & Spencer and Nespresso have opened stores, retailer expansion into the Finnish capital has slowed due to continued economic headwinds. Helsinki has also witnessed a decline in Russian visitors following significant fluctuations in the Russian Rouble exchange rate.

Looking at the wider European retail market and its key cities, international retailer expansion has continued apace. As a general rule, in the last two years, for every store that opened, one store closed down. London has the highest presence of international retailers, followed by Paris, Moscow, Milan and Madrid. Compared to European peers, Stockholm ranks 25th and offers an average representation of international retail brands. Copenhagen follows in 32nd spot, with Oslo, Gothenburg, Helsinki and Malmö further down the rankings. Despite the significant market opportunity, these markets remain relatively untapped from an international retailer perspective in a European context.

Looking forward, we expect international retailer expansion to accelerate across the Nordic region in the next couple of years, due to the growing appeal of its key retail markets. Competition between international brands is still relatively low, resulting in an increasing number of success stories for new entrants. The retail sales growth outlook is bright, in particular for the Swedish cities of Gothenburg, Malmö and Stockholm, followed by Copenhagen and Oslo. Finland’s economy is recovering and sales growth is forecast to outperform the Eurozone region in the medium term. The Nordic countries also benefit from low economic and political risk profiles. In addition challenges around foreign currencies and the distribution of goods will become less of a barrier for retailers looking to grow and diversify their sales revenues. While supply of retail space in the prime locations is scarce, new high quality developments, such as Mall of Scandinavia in Stockholm, are likely to act as a magnet for new brands, pushing the Nordic markets up the rankings.

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Purchasing Power per Capita vs Retail Sales Growth Forecast

The size of the circles in the graph below provides an indication of the number of international retailers present in each individual market.

Amsterdam

Antwerp

Athens

Barcelona

Belfast

Belgrade

BerlinBilbao

Birmingham

Bordeaux

Bratislava

Brussels

BucharestBudapest

Cardiff

CologneDublin

Dusseldorf

Edinburgh

Frankfurt

Glasgow

Hamburg

Kiev

Leeds

Lille

LisbonLiverpool

London

Luxembourg

Lyon

Madrid

Manchester

Marseille

Milan

Moscow (-3%)

Munich

Nottingham

Paris

Prague

Rome

Seville

St Petersburg

Stuttgart

Turin

Valencia

Vienna

Warsaw

Zagreb

Zurich

Copenhagen

Gothenburg

Helsinki

Malmö

Oslo

Stockholm

0

€5,000

€10,000

€15,000

€20,000

€25,000

€30,000

€35,000

€40,000

0% 5% 10% 15% 20%

Source: JLL, Michael Bauer Research (2014), Oxford Economics (April 2015)

Key Key European Retail Cities Key Nordic Cities

Purch

asing

Pow

er pe

r Cap

ita (E

UR)

Retail Sales Growth Forecast 2015-2019 (%)

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Demand

strong

steady

flat

Source: JLL

The key Nordic cities enjoy an abundance of attractive characteristics that fuel international retailer demand. These include a dynamic environment, high quality of life, an affluent population and a healthy economic growth forecast. Looking at Denmark, Finland, Norway and Sweden combined, up to 25% of the population lives within a 30 minute drive time of the six key cities. This is set to increase thanks to a growing population and high urbanisation rates.

The map below illustrates the key retail markets in the Nordic region. The number of each circle represents the

rank of each Nordic city, based on the total number of cross-border retailers present in each market. The arrow represents current occupier demand. As we can see there is a healthy demand for high quality retail space, thanks to an increasing number of domestic and international retailers targeting these markets.

The following pages contain a brief description of each of the key Nordic retail markets: Copenhagen, Helsinki, Gothenburg, Malmö, Oslo and Stockholm.

Key Nordic retail markets

3 Oslo 6 Helsinki

Copenhagen 2

Gothenburg 4=

1 Stockholm

4 = Malmö

Stockholm ranks as the most popular destination for international retailers in the Nordic region. The retail market benefits from a broad trendy and fashion orientated customer base. Approximately 30% of Sweden’s population lives within a 90 minute drive time from Stockholm’s city centre. Sweden’s capital city is also a popular tourist destination, particularly with visitors from neighbouring countries as well as Germany and the UK. Healthy retail sales growth in recent years has encouraged new international retailers to enter the retail market, including Michael Kors, Apple, Hollister Co., Camper, River Island and Sephora. High street and shopping centres are of equal importance in terms of retail sales. However, the highest rents are paid on Biblioteksgatan, the leading high street which houses numerous premium and luxury retailers,

such as Burberry, Karen Millen and Ralph Lauren. Other key high streets include Kungsgatan, Drottninggatan and Hamngatan. Stockholm has many strong performing shopping centres, including Kista Galleria and Täby Centrum. However, Mood Stockholm has been the city’s most notable scheme opening in recent years. Located in the CBD, the 10,400 sq. m centre is differentiated by well-known and local premium brands as well as a vibrant food and beverage offer. Mall of Scandinavia is a 100,000 sq. m shopping centre development located a few kilometres north of the city centre. The scheme is planned to open in November 2015 and is attracting new international retail brands to the city, including Lego, The Disney Store and Superdry amongst others.

StockholmRANK 1

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CopenhagenRANK 2

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Copenhagen ranks as the second most attractive destination in the Nordics. As an important metropolitan city it attracts many visitors for business and leisure purposes, including a large number of cruise ship passengers. The city is directly linked to Malmö via the Öresund Bridge. The retail market currently benefits from healthy population growth, strengthening its attractiveness for both domestic and international retailers. The prime retail pitch consists of Østergade, Amagertorv and Købmagergade, collectively called Strøget and known among tourists as the world’s longest pedestrian shopping street. Upmarket brands Gucci, Louis Vuitton and Hermes as well as department store Illum are located on Amagertorv and Østergade, the eastern section of Strøget. Købmagergade is just as popular as Strøget and houses many fashion

brands including Desigual, Abercrombie & Fitch and Vans. Prime rent levels continue to rise due to strong competition for Copenhagen’s best retail locations. Valentino, Salvatore Ferragamo and Tod’s have recently taken space in the reconfigured ground floor of the Illum department store and Prada is scheduled to open here in 2015. Greater Copenhagen has seven major shopping centres. In order to retain tenants and customers many schemes have invested in upgrades and fine-tuned the tenant mix. Fisketorvet, the city’s largest inner-city scheme, stands out with its strong tenant mix of international and upper market brands, including Superdry, G-Star, H&M and Monki.

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OsloRANK 3

Norway’s economy is strong and the country has over the years become one of the richest in the world. Oslo is the country’s cultural, political and economic centre, and is one of Europe’s fastest growing capitals. During the downturn, Norway’s economy showed strong resilience and is forecast to see healthy long term growth. Oslo’s retail market is by far the most developed destination in the country. Consumer spend per capita is among the highest in Europe and 25% of Norway’s retail sales are generated in the capital. In recent years, the city centre has benefitted from surging retail sales, with luxury retailers in particular experiencing strong growth. Much of the modern city centre was built during the 19th century, offering shoppers wide pedestrianised streets, parks and historic buildings. Karl Johans Gate is the most sought after high street by many Scandinavian and international retail brands. Strong retailer demand and a lack of available retail

space continue to push up rental values and have triggered a migration of retailers to adjacent streets. High-end retailers are clustered around Parliament and Steen & Strøm’s Magasin department store, while mainstream brands like H&M and Jack & Jones are located near the Central Station. Bogstadveien and Hegdehaugsveien have become attractive alternative locations, with brands including Zara, Oasis and Massimo Dutti. Located right next to the central station is Oslo City, the most visited shopping centre in Norway with more than 90 different mainstream shops and restaurants. Byporten, also located near the central station, contains a unique selection of over 80 shops and restaurants. EGER Karl Johan, located at Egertorget square, is Norway’s largest high-end fashion house and offers over 300 international fashion, beauty and lifestyle brands.

MalmöRANK 4

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Malmö is Sweden’s third largest city. With over 170 different nationalities it is a true international and cosmopolitan city. Since the mid-nineties, Malmö has been transforming from an industrial hub into a modern and leading knowledge based centre. The opening of the 12 km Öresund Bridge in 2000, connecting Malmö to Copenhagen, almost doubled the city’s catchment area and brought a new urban dynamic to the region. Retail sales growth in Malmö has during recent years outperformed the national average and this trend is expected to continue. The Malmö retail market is well developed with high street retail, shopping galleries and out-of-town shopping centres. The high street retail offer is concentrated between Stortorget and southwards along Södergatan, past Gustav Adolf’s square, over Parkkanalen and along Södra Förstadsgatan to Triangeln shopping centre. Hansa is another notable scheme in the city centre. The

tenant mix of Malmö’s inner-city is predominantly made up of mass market retailers, including mid-market fashion brands and beauty retail brands. Several large shopping centres and retail warehouse parks are located outside Malmö’s city centre. The opening of Emporia in 2012, a 78,000 sq. m out-of-town shopping centre, has been a magnet for new international retail brands such as Denim & Supply by Ralph Lauren, Desigual, Hollister Co. and Hunkemöller.

GothenburgRANK 5

As Sweden’s second largest city, Gothenburg is a vibrant and cosmopolitan place. The city is an international hub for trade thanks to Scandinavia’s largest harbour being located here. Gothenburg also has a rich history in manufacturing and houses major companies such as SKF and Volvo. In addition to a large and wealthy catchment area, the retail market also benefits from a vibrant student population as well as a large number of tourist visitors. Gothenburg’s prime retail area is concentrated around Kungsgatan and Fredsgatan in the city centre. International brands, such as Massimo Dutti, Zara and H&M are located here, as well as department store NK. Nordstan is part of Gothenburg’s prime retail pitch and links the area to Gothenburg’s central station. With 73,100 sq. m of retail space, this scheme is one of Sweden’s largest

shopping centres and attracts over 50,000 shoppers a day. Retailers include department store Åhléns and popular brands such as Desigual, Monki, Clas Ohlsen and The Body Shop. Frölunda Torg and Allum are two larger out-of-town shopping centres. COS, Starbucks and Vapiano are some of the latest well-known operators to enter the Gothenburg retail market. Demand for high quality units remains healthy with particular interest coming from upmarket brands.

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HelsinkiRANK 6

Helsinki is the capital of Finland and the economic and cultural centre of the country. Its art nouveau architecture and creative society reflects the fact that it is also one of the younger cities in the Nordic region. The retail market draws its shoppers from a large catchment area, as one third of Finland’s population lives within a 90 minute drive time from Helsinki’s city centre. In addition, Helsinki’s purchasing power per capita is amongst the highest in Europe. Whilst international brand penetration is still at a moderate level, demand for prime retail space from international retailers is high. Thomas Sabo, Habitat, Marks & Spencer and Nespresso are some of the latest entrants. Aleksanterinkatu, Pohjoisesplanadi, as well as part of Mikonkatu are Helsinki’s most prime retail high streets in the CBD. Fashion operators such as Louis Vuitton, Zara,

Mango and H&M are located here, as well as the leading department stores Stockmann and Sokos. Galleria Esplanad is an upmarket shopping centre, adjacent to the prime retail pitch and houses premium brands such as Tommy Hilfiger, Cos, Filippa K and Hugo Boss. Shopping centres Kamppi, Forum and Kluuvi complement the CBD’s retail offer. Itis, Jumbo, Sello and Iso Omena are major shopping centres located outside the city centre. Itis is the largest shopping centre in Scandinavia, offering over 150 stores and more than 20 food restaurants and cafeterias. There are also a number of new major out-of-town shopping centres in development, notably Tripla, Kivistö and Redi.

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To appreciate how rental levels are established we need to understand a retailer’s motives to take physical space in a market, as well as taking the local retail market structure into account. The reasons behind a retailer’s decision to acquire space can differ by brand and location. Depending on the market strategy, a store may support a wider wholesale, franchise or online business as well as supporting the wider brand awareness, in addition to generating direct sales. And even when the strategy is clear, securing the right space can be challenging.

The Nordic markets differ in terms of the make-up of retail space. In markets like Copenhagen or Oslo, retail is very much focussed around high street areas, whilst in other markets, such as the Swedish cities, established department stores and inner-city shopping centres play a pivotal role in attracting footfall and providing the necessary space for market entry. International retailers remain focussed on the best available retail space, and as markets become more saturated and supply more constrained, competition will increase, pushing up rental levels locally.

Copenhagen commands the highest retail rents in the Nordics. After recording average annual growth of 5.7%

between 2012 and 2014, prime rental levels on Østergade have reached €3,080 per sq. m per year (DKK 23,000 per sq. m per year). Oslo’s prime high street rent stands at €2,760 per sq. m per year (NOK 25,000 per sq. m per year), following impressive growth of 21% in 2013 and 25% in 2014. Retailers pay up to €2,090 per sq. m per year (SEK 19,400 per sq. m per year) for a high street unit in Stockholm, while Helsinki’s prime rent stands at €2,040 per sq. m per year, as supply on the prime retail pitch is limited.

Prime unit shop rents in the Swedish cities of Stockholm, Gothenburg and Malmö are at a relatively lower level than Copenhagen and Oslo, partly due to the structure of their local markets. To illustrate, the opening of shopping centre Emporia in 2012 has been a catalyst for new brands entering Malmö’s retail market. As this shopping centre is an out-of-town scheme, rental values in the central retail area remained stable. Prime rents generally increase when units change occupier. The churn rate for prime retail locations has been low in recent years, which has had a limited effect on prime rental growth in the Swedish cities.

Copenhagen commands the highest prime retail rents

3.Rental Analysis

Prime High Street Rent

Copenhagen

Oslo

Stockholm

Helsinki

Gothenburg

Malmö

0 500 1,000 1,500 2,000 2,500 3,000 3,500

(€/sq m/year)

Source: JLL (Q1 2015)

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

Share of Shopping Centre Stock vs Total Retail Stock

0%-25% 25%-50%

GothenburgMalmöStockholm

CopenhagenHelsinki

Oslo

Photo: AMF FASTIGHETER

Strong presence of Swedish and Danish brandsOver 15 cross border retail fascias, consisting of mainstream and premium brands, are present in all six Nordic retail cities analysed in this report. Not surprisingly a large share of these retailers originate from Sweden and Denmark, including successful brands such as H&M, Gant, Ecco, Gina Tricot as well as the Bestseller Group brands Jack & Jones and Vero Moda. United Colors of Benetton, Diesel, New Yorker and Mango are amongst the international brands that all have a presence in the six cities looked at in this report.

It is also worth noting that over 55% of the 250 international retailers analysed are yet to have a stand-alone store presence in any of the Nordic key retail markets. This group includes new entrants into Europe, such as J.Crew, Five Guys, American Eagle Outfitters and West Elm, all in the early stages of their European expansion, established luxury brands such as Miu Miu, Tiffany & Co. and Cartier, and also retail brands with large international store portfolios like Bershka, Pull & Bear, Gap and New Look.

4.Extensive and

Expansive Retailers

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Retailers show appetite for expansionWhilst the Nordic retail cities are relatively untapped in terms of cross border retailer presence, these cities are on the rise in comparison with established retail cities such as London, Paris and Milan. In fact, international retailers expanded into the Nordic region at a slightly higher rate than for the whole of Europe as highlighted in our report, Destination Europe 2015. Over the past two years, each of the Nordic cities have on average welcomed 11 new entrants, ahead of cities in West and South European countries.

Superdry, Sephora, Michael Kors, Hunkemöller and Mac Cosmetics as well as the food & beverage operators Starbucks and Vapiano, are some of the brands that have opened multiple stores across the Nordics.

Average Number of Cross Border Retail Entrants by City

The graph below illustrates the average number of new entrants per city in the respective region, covering a 24 month period between 2012 and 2014. It excludes store closures that have occurred in the same period.

For some retailers, the preferred route to expansion has been through franchise partners. Franchising represents a good way to de-risk portfolio expansion and is a relatively capital light route to market for the parent company. It is however not without risks, which include finding the right franchise partner with aligned aspirations, and the potential to lose control of the brand and operations, if the correct guidelines are not in place. However, if store performance exceeds expectations a retailer may decide to take over a franchisee’s store. Zara recently took over its franchise store from Stockman in Helsinki, demonstrating the strength of international retailing in this city.

Stronger European brands are increasingly looking for opportunities away from core markets and beyond their traditional operating borders. Spanish brands, Zara and Mango, are expanding in the growth markets of Asia Pacific. The Finnish brand Marimekko is expanding globally and operates a flagship store in New York. In addition, Swedish retailer H&M has recently announced plans to enter the Indian market. Given the high coverage of Swedish and Danish brands in the region, we expect these leading retailers to expand throughout the rest of Europe. Lindex, has recently opened a store in London’s Westfield Stratford City and the Norwegian Varner Group, a major fashion group in the Nordic region, are in the process of exporting their Bok Bok and Dressmann brands to Austria.

14121086420

Average Europe Overall

New

Entra

nts

Nordics CEE & Russia,Ukraine & Turkey

South Europe West Europe

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The UK is the largest exporter of cross-border retail brands into the Nordic region, driven by mainstream brands such as The Body Shop, Lush and Oasis, as well as premium brands such as Karen Millen, Mulberry and Superdry. The USA is the second largest exporter, with premium brands, in particular Timberland and Tommy Hilfiger, having built up a significant presence across the key Nordic retail markets, in line with the overall European trend. In our report Destination Europe 2015, where we looked at Europe’s top 57 retail cities, we noted that the USA has become the number one exporter of fascias across Europe. The USA has overtaken Italy in the last 24 months, driven by premium brands expanding their retail footprint.

Germany ranks third, just behind the USA, and is the largest exporter of mainstream brands across the Nordics with fashion brands such as Esprit, New Yorker, Triumph

as well as the food & beverage operator Vapiano. Sweden and Denmark are the fourth and sixth largest exporters of cross-border retail brands. Whilst it is not surprising that Scandinavian brands have built-up a large presence in their own region, some of Europe’s largest and most successful retail brands originate from this region, including H&M, Gant and the Bestseller Group brands, Jack & Jones and Vero Moda. Additionally, exciting brands such as House Of Dagmar, Rodebjer, Whyred and Nudie Jeans are growing in popularity, and have the potential to export their brands across Europe.

Italy ranks fifth, between Sweden and Denmark, and is the largest exporter of luxury fascias into the Nordic region. Max Mara, Bottega Veneta, Emporio Armani and Gucci are amongst the high-end brands that operate multiple stores across the Nordic region.

UK tops the retailer exporter league

Retailer Country of Origin

Key: Rank – Retailer Coverage Ranking (1-250)

GERMANY

EspritHugo BossMarc O’PoloNew YorkerTriumph

ITALY

BenettonDieselMax MaraMCSBottega Veneta

UK

Karen MillenLushMulberrySuperdryThe Body Shop

Source: JLL

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SWEDEN

Flippa KGantGina TricotH&MTiger of Sweden

USA

Foot LockerMarc JacobsStarbucksTimberlandTommy Hilfiger

2nd

5th

1st

DENMARK

EccoJack & JonesOnlyTigerVero Moda

4th

3rd

6th

5.Food & Beverage: Time is the new

commodity

Jonathan Doughty, JLL’s new Head of EMEA Foodservice Consulting comments upon the future of food service offer in retail places.

Time is the new commodity for consumers. Shoppers now expect retail destinations to satisfy their consumer needs but also enable them to escape and retrench; they expect nothing but the best from their comparison-based shopping trip. Venues need to be destinations in their own right and offer an experience beyond pure retailing. One impact of this new found consumer expectation on the physical shopping centre environment is the growth, both in quantity and in importance, of the food service offer.

An engaging and appropriate foodservice offer increases dwell time, provides a point of difference and gives the consumer a regular reason to visit, especially if they are located in an office building nearby. People need to eat. The proportion of guests visiting shopping centres who choose to eat is rising rapidly as the provision, choice and variety increases; however despite this pace of change we are certain that we have only just begun to understand how to satisfy consumers with food service.

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Dining destinations: the redefined offer In the “old days” food could simply be distributed around a centre and was often an afterthought secondary to the retail offer, but we are now seeing a very strong trend to create “dining destinations” as landlords begin to understand the importance of a broad, quality food offer in creating and maintaining dwell time. In the majority of cases, these are not high class or expensive locations but simply a concentration of food service in one area creating an attractive choice and variety for the consumer. We know that the guest likes to go to these “dining destinations” because they provide choice and variety in one place. Whether that choice is about cuisine, service style or price point, if the guest is presented with a cluster of options they are able to make their decision when they want to.

It is also important to recognise that we are not just talking about food courts when we talk about the clustering of food offers, although the success of Trinity Kitchen at Trinity Leeds shows that when done innovatively, they can be attractions in their own right. Whilst many new food courts have been delivered in the past five years, particularly around Central and Eastern Europe, they only suit certain locations and require extremely careful planning and execution to make them successful. Dining destinations, whilst still requiring the same level of professional input, do not have to be based around common seating areas but can be a collection of cafés and restaurants with their own seating areas and individual brand “look and feel”. It is our view that dining destinations trade better than distributed food service and we would consider turnover to be at least 15% higher in dining destinations per square metre if they are properly designed and launched. In our experience, operators trading together in one space create a more appealing and enjoyable location than individual offers spread through the retail malls.

This is especially true in centres that have an evening leisure economy but when the stores don’t stay open late. If a centre has a cinema there is the opportunity to provide guests with their third meal occasion of the day. The evening meal, if taken before or after a cinema visit, represents a significantly higher average spend than breakfast or lunch. However, to achieve this, we strongly recommend that the restaurant locations are clustered near the entrance to the cinema. In this way the guest can stay at their table longer knowing they only have a short trip to their cinema seat.

Dining destinations should have a broad all day appeal and include a range of food types, cuisines, service styles and ideally a range of price points. The type of user also needs to be considered, and if it is going to be truly successful then it is important to create different areas for different consumers. This may require business zones for office workers with power sockets and WiFi, or areas with soft play facilities and bottle warming for guests with young children. Careful planning is key in ensuring destinations are attractive for both the guest and operators.

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Uneven demand and the need for a dynamic offer

It is relatively easy to estimate and calculate the size and scale of a food service offer in a shopping centre when the footfall is consistent and evenly spread throughout the week such as in larger city centre projects. However we must not forget that these do not represent the majority of the shopping centre industry where there are numerous types of locations that have highly variable footfall. For example, sub-regional centres, convenience centres, outlet malls and retail parks across Europe see huge differences in their footfall from weekday to weekend.

This creates a real challenge, as it is extremely hard to provide a food service offer that is the right size to allow the consumer to have what they need when the footfall may be five times greater at a weekend than on a weekday. Sensible planning of food service would dictate a small number of units to ensure that there is enough business for everybody, but these would likely be overwhelmed at the weekends.

So what are the solutions and how flexible can food service really be to the problem of highly variable footfall across a trading week or year? Solutions which we have formulated for clients include:

• Street Food – the ‘rise and rise’ of street food continues at a pace and is a great way for retail destinations to increase their food service capacity for limited periods of high demand. We often see them as part of a Christmas market, but we believe that there is an opportunity for having a designated area that allows local street food traders space at weekends or other busy times throughout the year.

• Food Trucks – rather than a whole street market, a similar impact (but at smaller levels) can be made by incorporating specific food trucks. These operators, often having a huge and loyal following, can operate from as small a space as a single car park spot – in fact the only problem with space might be for the queues that they generate.

• Satellite and Pod units – creating a ‘satellite’ unit that is operated under the brand of an existing tenant but operates only during busy periods provides additional capacity. These can be located adjacent to the main unit or remote in a different area of the centre.

Rebalancing income risk vs. long term valueHow investors, and ultimately their valuers and shareholders, attribute “value” to these initiatives remains a challenge, particularly in shopping centres where current lease structures and valuation methods don’t easily allow for this type of approach. As we know, landlords and developers have traditionally coveted certainty of income and long leases. What this approach requires is flexibility around a core offer. This means that the bulk of food service provision can be delivered via lower risk, strong covenant faster food and leisure dining operators on long leases; supplemented by some shorter leases and temporary traders who offer variety, differentiation and a flexible offer.

We are certain that we are going to see a lot more of this flexibility being built into the food service offer as the long term resilience and success of retail places continues to be driven by the ability to differentiate and attract consumers and ultimately retailers. Getting the appropriate offer, in terms of operators aligned with “visitors” and an offer that is leading in this fast changing sector, is where the opportunity lies. Success does not necessarily equal more food service, and an appreciation for the complexity of this increasingly important footfall driver is starting to emerge. Developers, investors and asset managers who are able to balance short term requirements with longer term vision and consumer focus, will be commercially rewarded in the redefined world of retail; and gastronomy!

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The Nordic foodservice marketAs with the rest of Europe, the Nordic shopping centre market has been actively elevating foodservice development to the forefront of future strategic plans. Unibail-Rodamco has had a great influence on the market with the company’s Dining Experience concept planned for selected existing centres across the region, as well as the soon to open 100,000 sq. m Mall of Scandinavia, set to become one of the largest schemes in the region. Other developers are taking note and re-assessing the foodservice offers in their existing and proposed centre portfolios.

The foodservice market is dominated by home-grown brands with the likes of Max Burgers, O’Leary’s, Espresso House and Wayne’s Coffee established along key high streets and in most shopping centres. However, master franchise agreements have seen the introduction and expansion of international brands such as Vapiano, Wagamama and Jamie’s Italian. We expect more international brand expansion into the region as the foodservice market continues to grow and diversify.

Brand expansion has not only been inbound however, with the likes of Sticks’n’Sushi successfully exporting its concept from Denmark to the UK and, in the case of Joe and the Juice, to France, Germany and the UK. Both brands bring with them their ‘Nordic chic’ design interiors.

The ‘traditional’ market, however still remains strong with the ‘Saluhallen’ Food Halls, combining market hall stalls with an ‘eat at counter’ or take away offer, as popular as ever. We expect to see further growth in this market but with a more modern and contemporary design twist.

6.Luxury

The global luxury goods market is maturing, stabilising and consolidating as it adapts to demanding, increasingly affluent and highly mobile consumers. On a global level the luxury goods market has been relatively resilient to economic crisis and according to management consulting firm Bain & Company, the global luxury good sales is estimated to grow 4%-6% annually between 2014 and 2017. Overall performance of the luxury sector will depend not only on economic growth, but on factors such as volume of travel, protection of intellectual property, consumer propensity to save, and changing income distribution.

Sales of luxury goods are also on the rise in the Nordics, particularly in the more dynamic affordable luxury segment. Local residents in Oslo, Stockholm, Helsinki and Copenhagen are among the most affluent shoppers in Europe. Whilst shoppers in the Nordics are traditionally not known for displaying a large amount of wealth, consumer attitudes towards luxury retail are changing, and as a result shoppers are becoming more open towards affordable luxury products which can be used on a daily basis.

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Source: Michael Bauer Research 2014

Purchasing Power per Capita (EUR)

London30,000 - 38,637

23,000 - 29,999

16,000 - 22,999

7,000 - 15,9993,637 - 6,999

LisbonRome

Paris

Berlin

Oslo

Stockholm

Helsinki

Gothenburg

Copenhagen Malmö

Madrid

Zurich

Munich

Moscow

Tourism is another key driver of the luxury market, and tourism growth is having a burgeoning impact on retailer expansion strategies, particularly within the luxury sector. Retailers are increasingly viewing tourism statistics as a key metric when assessing new markets. The Nordics have seen a steady rise in tourism over the past ten years and between 2003 and 2013, total nights spent at tourism accommodations across Denmark, Finland, Norway and Sweden, has risen by 16% overall. This is likely to increase as tourist arrivals are forecast to reach 1.8 billion by 2030 globally, a 75% increase on 2012.

Whilst the overall number of tourists visiting the Nordics is growing, recent fluctuations in the Russian Rouble exchange rate has resulted in the decline of Russian visitors. The drop in visitors is having an impact on retail sales, which is being particularly felt in Helsinki. Interestingly however, some of the ‘lost’ retail sales are compensated by Asian visitors, who are reported to have increased their spend, especially on luxury goods such as jewellery.

Tourism Influx Continues to Grow Across the Nordics

The graph below illustrates an index of the total nights spent at tourist accommodations by country and year.

Source: Eurostat (April 2015)

95

100

105

110

115

120

125

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EU (28 countries)

Denmark

Finland

Sweden Norway

Index

(200

4 = 10

0)

Nordic Cities Among the Wealthiest in Europe

The size of circles on the map below represents the purchasing power per capita of the local retail market within a 30 minute drive time from the prime retail area in each city centre. The circle size therefore provides an indication of the consumer affluence per market.

LondonParis

MoscowMilanRome

IstanbulMunichMadrid

BarcelonaZurich

KievSt Petersburg

ViennaBerlin

AmsterdamHamburg

PragueDüsseldorf

BrusselsFrankfurt

AthensLisbon

WarsawAntwerpBudapest

BucharestCopenhagen

TurinStockholm

LuxembourgCologne

LyonValencia

ManchesterMarseilleBordeaux

LilleAnkara

StuttgartBilbao

OsloBelgradeHelsinki

DublinBratislavaGlasgow

CardiffLeeds

SevilleBirmingham

EdinburghLiverpool

ZagrebNottingham

BelfastMalmö

Gothenburg

0 50 100 150 200 250 300 350 400 Index

JLL Cross Border Luxury Retailer Attractiveness Index 2015

12345678910=10=12=12=14=14=14=14=14=1920=20=22232425=25=25=2829=29=31=31=33=33=35=35=35=3839=39=39=42=42=44=44=44=44=44=44=44=44=52=52=52=52=5657

City Rank

Average

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Source: JLL

Key Key European Retail Cities Key Nordic Cities

(Average representation = 100)

Copenhagen is the leading luxury city in Nordics

Copenhagen ranks as the most popular destination for luxury retailers in the Nordics. Østergade, running from Illum department store to King’s New Square is particulary sought after by upmarket brands as it benefits from high footfall from local affluent residents, as well as tourists and daily visitors. Max Mara, Hermes, Gucci and Burberry are some of the upscale brands present in Copenhagen. The opening of the Öresund Bridge provided an additional boost to Copenhagen’s luxury market as wealthy Swedish residents, particularly from municipalities surrounding Malmö visit the city for their luxury shopping.

Stockholm is only marginally behind Copenhagen in terms the number of international luxury retailers present. Upmarket brands such as Burberry and Longchamp are located on the high street Biblioteksgatan, whilst Louis Vuitton and Gucci have their stores on the nearby Birger Jarlsgatan. The opening of Chanel on Birger Jarlsgatan will further strengthen the luxury brand presence in Stockholm.

Oslo currently ranks third and is likely to catch up with Stockholm and Copenhagen over the next couple of years, depending on available supply, as an increasing number of luxury brands are keen to enter the market. Helsinki, Malmö and Gothenburg are next in the ranking, with either limited or no international luxury retailer presence.

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Louis Vuitton and Max Mara top the rankings

French brand Louis Vuitton and Italian fashion house Max Mara are at the top of the luxury rankings in terms of retailers with the highest presence across the key Nordic retail markets. These renowned brands are present in all the Nordic capital cities and are the most expansive luxury retailers when looking at Europe’s key retail markets overall.

Other expansive luxury retailers in the region include the New York based fashion designer Michael Kors, Italian brand Emporio Armani, as well as two other iconic Italian luxury retailers, Gucci and Bottega Veneta, both owned by the same company. In addition, French fashion retailer Hermes and established UK brands Stella McCartney and Burberry have a strong presence in the Nordics.

Constant evolution required in virtual world

Overall luxury retailer brand penetration across the Nordics is currently still below the European average. While mainstream retailers regularly penetrate beyond the core retail markets, luxury retailers tend to prefer the larger conurbations, such as London, Paris and Milan, and where possible congregate within defined luxury areas or streets. Their reach beyond these markets often relies on wholesale business.

Although global luxury markets are growing steadily, luxury retailers have to adapt to structural change and in particular to the new virtual world. More specifically, this means dealing with new levels of market complexity, accounting for new kinds of buying behaviour, pushing into new markets, evaluating different business models, and doing more with digital technology. Luxury retailers in particular are increasingly focussing on city-level strategies, or at least on strategies that target a cluster of cities with similar market and consumer characteristics, rather than the traditional regional-level strategies. The Nordic cities’ similarities and proximity to one another offer a great market opportunity for luxury retailers looking to grow and mitigate risk in other markets.

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The Nordic retail markets are on the rise. Since 2012 we have witnessed a large number of international retailers expanding into the six key Nordic retail markets. As a result, international brand penetration across the region rose at a higher pace than for the rest of Europe overall. The UK is the largest exporter of cross border retail fascias across the Nordic region, driven by expanding mainstream and premium brands, followed by the USA and Germany. Over 15 cross-border retail brands are present in all the six Nordic key retail markets, including the Swedish and Danish brands H&M, Tiger of Sweden, Ecco and the Bestseller Group brands, Jack & Jones and Vero Moda.

We expect international retailer expansion to accelerate across the Nordic region in the next couple of years. As Europe’s retail markets are undergoing structural change, combined with a multi-speed recovery of the economy, the key Nordic retail markets have become attractive destinations for cross border retailers looking for growth and diversification. Not only do Oslo, Copenhagen, Helsinki as well as the Swedish cities, Stockholm, Gothenburg and Malmö stand out as some of the most affluent cities in Europe, these cities also continue to demonstrate a high degree of market maturity, resilience and growth prospects, in addition to real estate transparency and low risk.

Barriers to entry, including the distribution of goods and the use of different currencies, are becoming less of a challenge for a rising number of retailers as the opportunities increasingly outweigh the costs. As the supply of high quality retail space in prime shopping areas remains scarce, new streets will emerge and alternative shopping destinations will embrace innovative solutions, including unique food & beverage offers, to attract footfall. Successful expansion ultimately depends on securing the right space, in the right place, on the right terms and as such, it is clear that cross border expansion needs to be careful, considered, and selective.

For now, Stockholm ranks as the most attractive location for international retailers in the Nordic region, whilst Copenhagen leads the regional luxury rankings. Oslo is the wealthiest Nordic city and is catching up fast, as an increasing number of mainstream, premium as well as luxury brands are looking for opportunities to open up stores there. Helsinki is currently the most untapped city in terms of cross border retailer presence. However, we expect it to move up the rankings when the economy moves into full recovery at the end of 2015.

6.Conclusion

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Methodology The analysis looks at the presence of brands in the specific cities covered, as well as retailers which are opening imminently. It focuses 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. The data analysed in this Nordic focussed study originates from our Destination Europe 2015 report, released in November 2014.

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.

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Contact

James DolphinInternational Director, Retail Agency+44 (0)7921 944 355james.dolphin@eu.jll.com

James BrownInternational Director, Retail Research & Consulting+44 (0)7860 408 863james.brown@eu.jll.com

Ben BinnsAssociate Director, Pan European Retail Agency+44 (0)207 087 5245ben.binns@eu.jll.com

Tjard MartinusAssociate Director, EMEA Retail Research & Consulting+44 (0)203 147 1674tjard.martinus@eu.jll.com

Copyright (c) Jones Lang LaSalle IP, INC 2015No 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.

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