REAL ESTATE PAN-EUROPEANFOR A CHANGING WORLD FOOTFALL ANALYSIS Key global and lifestyle cities 2017-2018 PROPERTY DEVELOPMENT TRANSACTION CONSULTING VALUATION PROPERTY MANAGEMENT INVESTMENTRETAIL MANAGEMENT Real EstateReal Estate forfor a a changing changing world world CONTENT Macroeconomics ............ 04 Amsterdam .......................... 30 Helsinki ...................................... 46 Warsaw ...................................... 62 Synthesis ................................... 06 Athens ......................................... 32 Lisbon ........................................... 48 Zurich ............................................ 64 Barcelona ................................ 34 Munich ........................................ 50 London ........................................ 10 Brussels ..................................... 36 Oslo ................................................. 52 Methodology ........................ 67 Paris ................................................ 14 Budapest ................................. 38 Prague ......................................... 54 Results by country ........ 68 Madrid ........................................ 18 Copenhagen ....................... 40 Rome ............................................. 56 Contacts ..................................... 70 Milan .............................................. 22 Dublin ........................................... 42 Stockholm .............................. 58 Berlin ............................................. 26 Frankfurt ................................... 44 Vienna .......................................... 60 2 BNP Paribas Real Estate RETAIL FOREWORD BNP Paribas Real Estate is delighted to For the past five years, regular present our first fully comprehensive footfall counts have been Pan-European Footfall Analysis undertaken in prime cities across covering key global and lifestyle cities. Germany. Even if the results may be Changes in retail over the last decade influenced by local circumstances are no longer cyclical, but are now structural. As rapid and should not be interpreted as the "pure truth", technological and structural developments occurred they indicate the general trends very well. within the retail sector, many feared the internet would Significant differences in the number of passers-by kill our High Streets and shops. However, this is not the have implications for customer conversion- and case. It has merely liberated them and encouraged the with it sales-potential. creation of new retail models. Changes in pedestrian frequency over time are For many International Retailers, the major cities interesting as well. If they show a consistent continue to demonstrate their appeal and our High pattern, as it is a clear sign that the structure and Street Footfall Analysis emphasises the desire of the importance of the location is changing. Notably consumer to embrace physical retailing, especially as in times when retailers have to adapt and improve new models and space formats of successful retailers their concept and strategy, such qualitative continue to rapidly evolve. aspects are particularly relevant. Our study has been co-ordinated across 23 global and Our clients rely on this information together lifestyle cities throughout Europe, which was activated with other data and examinations to formulate on Saturday the 10th of June 2017 between the hours their expansion strategy and to identify of 14:00 and 16:00 or peak hours, taking into account particular locations of interest. the cultural trading differences of cities. Each city was It is therefore a significant advantage to our divided into “Mass-Market to Upmarket” and “Luxury” clients that the Research team of BNP Paribas Real categories and between 3 and 10 streets were selected, Estate has undertaken a coordinated European- depending on scale and population of the city. wide study. From my point of view the results We hope you find this Report useful, as many of our are very interesting and will provide a better active and expansive International Retail clients have understanding and comparison of all markets and specifically asked for this style of analysis. Should you different developments across the major European require more granular data, then please do not hesitate cities. I believe this report will supply our clients, to contact us and we will direct you to our various colleagues and market participants an interesting Research Departments. read and will elicit inspiration for the future. Larry YOUNG Wolfgang SCHNEIDER Head of International Investment Group Head of Research - Germany RETAIL BNP Paribas Real Estate 3 PAN-EUROPEAN ECONOMIC OVERVIEW Europe’s recovery is beginning at a poignant time, marking the tenth anniversary of the credit crunch, the start of a sequence of events that led to the Global Financial Crisis (GFC) of 2008/9, and the So- vereign Debt Crisis of 2012. Geopolitical context and Brexit reinforce uncertainties in a medium-term. Samuel DUAH Over this period Europe’s retail market has changed markedly. For retail the last ten years are essen- Head of Real Estate Economics tially a story about the struggle to create value amidst falling demand whilst adapting to profound at BNP Paribas Real Estate disruptive change in the distribution chain; from producer to the consumer. Growth returns GDP growth average 2017-2018 to the European economy % Europe’s slow economic recovery since 2009 is now strengthe- ning. This is evident by the 2.2% quarterly annualised growth rate 3 seen since mid-2016, well above its trend growth. It highlights the fact that European economic growth, at this point, is outperfor- 2 ming other developed economies and the medium term outlook looks promising. Although growth has been broad-based some countries, admittedly in Southern Europe, are yet to regain their 1 pre-crisis level of economic output (Italy and Portugal). Spain though, has seen some of the fastest growth in recent quarters, 0 helping it to surpass its pre-crisis level. However, the most im- portant thing here is that domestic demand, supported by both UK Italy Spain consumer spending and investment demand, appears to be a France Poland Ireland Austria Greece Finland Norway Sweden Belgium Portugal Hungary Denmark Germany key driver for growth in most countries; a development that is Switzerland Netherlands Czech Republic positive for the retail trade. 4 BNP Paribas Real Estate RETAIL Household Disposable Income % The role of inflation 6 Poland 4 France in modern 2 Italy retail pricing power 0 Spain - 2 Germany Post GFC, consumer demand fell, whilst sup- - 4 Sweden ply of goods and services was slow to adjust. - 6 For Europe this meant flirtation with deflation UK (and for most part low level of inflation). The 10 11 12 13 14 15 16 17 18 low level of inflation has remained a key fea- ture of the European economy since 2009. Headline inflation at the European level is Low wage growth but real household currently at 1.5% p.a. remains marginally below what central banks deem desirable. income is growing Although this represents a significant impro- Despite economic growth it is likely that consumer demand is only at an early stage vement on the recent past, it remains low in of gaining the sort of momentum it had pre 2007. For Europe this is tied to the historical context. employment situation because increased consumer demand is underpinned by job Low inflation means the intense price com- growth and, household income and wage growth. petition, traditionally a ground for difference Eurozone unemployment rate peaked at 12.1% in 2013. It has subsequently between retailers, no longer functions in the improved to stand at 9.1%. Despite this the story remains mixed across countries. same way. With low demand, price compe- The lowest rate outside the Eurozone can be found in the Czech Republic at 2.9% tition still exists only because overtly raising and in the Eurozone in Germany at 3.0%, with UK recording a historical low of 4.3% prices makes traditional retailers stand out in recent months. Overall we believe the downward trend will continue over the for poor value for money, a situation made come years, backed by the improving economic picture. more acute by the pricing clarity offered by Notwithstanding the falling unemployment rate, real wage growth across Europe has information technology. remained weak at 0.5%. The rational for this is multifaceted and appears transitory. In an environment of low demand and in- This implies that in the medium term we are likely to see these factors soften and creasing online sales, retailers struggle to in- meaningful real wage growth appearing. The boost to household real income will crease margins. Instead increasingly retailers support consumer spending. It is more people in work plus and wage growth that is are competing on non-price differences and the backbone for consumer confidence and increases in retail sales. If maintained, generating margins by re-organising their retailers can look forward to a more predictable and positive macro environment operations. than that experienced over the last ten years. RETAIL BNP Paribas Real Estate 5 SYNTHESIS Foreword by the authors. This Pan-Eu- ropean Footfall Analysis is aimed at providing a one-off “picture” of the prime streets in 23 key global and lifestyle cities. Pedestrian traffic is one of the prime indicators of retail strength, albeit not sufficient in its own right to be a fully determinant driver. The fundamental measure of a successful