Factory Outlet Centres in Europe are increasing in popularity, as the cost of living puts a squeeze on retail spending, steering consumers to where they can find a better price.
A survey conducted by ecostra, and now released by Savills, reveals that Germany is the country which offers the most potential for FOC in Europe, with 46% of brands interested in expanding into the country in the next three years.
This is due to high GDP per capita (€38,905) and the low density of outlets per inhabitant compared to other European countries – 4 m2 of factory outlets per 1,000 inhabitants against 11 in the UK and 12 in Italy.
France follows in second place (35%), ahead of Spain (29%), the UK (19%) and Italy (19%).
Spain has seen the largest increase in interest between 2021 and 2022, from 18% to 29% of brands looking to expand there in the next three years.
Brands plan to open, on average, 2.5 outlet stores within the next 12 months in January 2023 compared to 2.6 in 2021.
Compared to shopping centers, FOC properties have lower operating expenses and, consequently, are less exposed to energy costs, which explains their high occupancy, around 96–97% and up to 100% for the best villages.
In Poland, for example, the occupancy rate was between 94–98% between July and August in 2022.
However, the sector is not immune to challenges with the two biggest being staff shortages and increasing property expenses (heating and energy).
The stock of outlet centres in Europe remains limited, accounting for around 2% of the shopping centre stock.
There are currently around 200 operating FOC schemes across Europe, covering 3.6 million m2 of gross leasable area retail space, with the top three countries being the UK (20%), Italy (19%) and France (12%).
The current pipeline for completion by 2025 amounts to 370,000 m2 across about 20 schemes, of which five in the UK (114,000 m2), three in France (59,400 m2) and three in Italy (59,000 m2).
Across Europe, the top four operators account for 38% of all factory outlet stock.
Market leader, McArthurGlen, has a presence in eight countries with over 3,000 stores across 24 FOCs, followed by Neinver with 800 brands across 17 FOC in six countries and ROS Retail Outlet Shopping which owns 12 FOC across Europe.
Since 2023, €69 mln has transacted, including the Ringsted Outlet in Denmark, sold for €52 mln to Patrizia in January 2023 with a yield of 6.20%.
