E-tailing fails to sideline high-street stores

E-commerce is reshaping the retail industry but for the time being, there doesn’t seem to be any danger of online shopping wiping out high street retail, according to Yvonne Court, a partner in C&W’s cross border retail team in London. 'Some products - such as books, DVDs and music - work better online than others. For example, not everyone wants to buy clothes or footwear online. Also, there’s the question of immediacy - if you need to have the product on the same day, you’re not going to buy it online.'

James Dolphin, head of the European retail agency at Jones Lang LaSalle in London, agrees: 'We talk about increases in technology and Apple leads the way. But people still queued for 36 hours outside the Apple store in London in June to get the latest iPhone. Ultimately, a lot of people still want to see, touch and feel a product before they buy it. The best retailers know that they need to combine on-and-offline worlds. I don’t believe that the high street or shopping centres will be abandoned.'

Nevertheless, retail as we know it might soon be a thing of the past. According to the panel 'Retail in 2050 - the future is now', which ran as part of ULI’s Urban Leader Summit in Frankfurt in June, existing retail capabilities are likely to merge, with additional add-on features becoming key. As such, instead of simply co-existing, in store shopping and e-tailing are likely to feed off each other far more, said Magnus Lindkvist, founder of Swedish business intelligence firm Pattern Recognition AB, who was voted Sweden’s business speaker of the year in 2009. ‘For example, consumers will be able to go into a store and try something on. If they then want to order it, say, in a different colour, stores may have computer terminals where consumers can then order online in store and have the item shipped to their home. It will be like the movie ‘Minority Report’ where online and offline worlds merge,’ he said.

European shopping centre development has already slowed considerably since the financial crisis struck. In 2009, the sector experienced the sharpest decrease in new shopping centre space in almost 15 years, according to C&W. In total, around 7.4 million m² of space was completed across Europe in 2009, down 19% on 2008. This equates to 256 new shopping centres, which account for around 89% of total new space, with refurbishments and extensions accounting for the rest. Total shopping centre space in Europe now stands at just under 128.3 million m2, according to C&W.

In Western Europe, the development pipeline has also shrunk: around 6.1 and 5.0 million m² of space is expected to be completed in 2010 and 2011 respectively. However, in many European markets, a large number of shopping centre projects - with all the necessary planning permits in place - have been shelved, ready to go when the market picks up, according to C&W.

The flipside is that landlords could see some good rental growth, according to Court at C&W. In markets like Russia, there is still ‘huge capacity’ for shopping centre development as there is more obsolete stock, she added.

The highest prime shopping centre rents in Europe are in the UK, where they stand at EUR1,900 per square meter per annum, followed by France with EUR1,700 and Russia with EUR1,500, according to JLL. Due to the limited availability of prime retail space in many shopping centres across Europe, the outlook for prime rents in most markets is stable, despite the inevitable slowing of demand from occupiers over the last 18 months.