Europe’s retail destinations fall into a number of distinct categories. Understanding what those are, and the forces shaping them, is essential for all retailers as they seek to balance opportunities and risks in the development of their expansion plans, writes James Brown, head of European Retail Research at JLL, in a preview of JLL's [link="Destination Europe 2015"]http://bit.ly/destination-europe[/link] report which is due to be launched on 26 November.

Europe’s retail destinations fall into a number of distinct categories. Understanding what those are, and the forces shaping them, is essential for all retailers as they seek to balance opportunities and risks in the development of their expansion plans, writes James Brown, head of European Retail Research at JLL, in a preview of JLL's Destination Europe 2015 report which is due to be launched on 26 November.

The global presence of today’s international retail brands might persuade the casual observer strolling down the main shopping streets of many large European cities that, when it comes to retail, one city is much like another.

But a closer look at the specific characteristics of each city reveals a much more diverse European retail landscape. Europe’s retail destinations fall into a number of distinct categories. Understanding what those are, and the forces shaping them, is essential for all retailers as they seek to balance opportunities and risks in the development of their expansion plans.

JLL’s Destination Europe 2015 report covers the performance of 57 retail centres in Europe. Our analysis underlines how a complex range of factors is driving the diversity of the European market. The appeal of a city consists of variables that include market size, consumer a_x001E_ffluence, market maturity and transparency, along with less tangible attributes such as brand awareness and prestige, tourist appeal and diversity.

Taking all these different factors into account demonstrates how global centres like London, Paris, Milan and Madrid present a di_x001D_fferent proposition to cities that are in growth mode, such as the major capitals in Central and Eastern Europe. Mature cities, including large regional centres in France, Germany and the UK, offer their own unique combination of market potential and limited relative risk.

And in a further category, those cities that we describe as transitional – Moscow, Istanbul and St Petersburg – are catching up fast with their global counterparts, offering huge market opportunities and attracting significant numbers of international retailers.

CONTINUED UNCERTAINTY
The European economy unquestionably faces a degree of continued uncertainty. There are fears of sluggish growth and some even have concerns about the possibility of deflation. However, the outlook is by no means uniformly gloomy. While cities are by no means immune to the prevailing economic weather, over the last couple of years many cities in Europe have shown remarkable resilience, or the ability to bounce back quickly from adversity.

The major global centres in Europe, including London, Paris and Milan, continue to power ahead. At the other end of the maturity spectrum, cities in Central and Eastern Europe, such as Belgrade, Budapest and Zagreb, buoyed by rising disposable incomes, are showing strong growth potential. Over the last two years, international brand penetration grew by 8% in the region, which now has more cities in the top 30 retail locations than southern Europe.

Established cities that have developed new, high-quality retail spaces have also been rewarded by an influx of international retailers. New entrants have been attracted to developments such as St Davids in Cardiff, Trinity in Leeds and the Golden Quarter in Vienna, helping to drive local prime rents to record levels. By creating attractive new areas for shoppers with optimum space for retailers, these cities have been able to unlock international retailers’ pent-up demand.

We have seen considerable churn in the European market. Our research found that in the last two years one store has closed for every two that have opened. Some of this might be explained as a flight to certainty away from markets in decline, as retailers have looked to secure and grow their presence in established, mature markets.

Churn is inevitable; for some it is about expansion, some portfolio optimisation, or a combination of the two. The expansion of US retailers has been a continued theme. The US has now overtaken Italy as the number one exporter to Europe’s top retailer destinations. US retailers make up 18% of the total international retailer presence in the 57 European markets covered by our report. It’s clear that international retailers are becoming more strategic in their search for growth across Europe and beyond.

Going forward, we see a detailed understanding of what each city o_x001D_ffers becoming increasingly important to ensure a tight strategic fit that can deliver a balanced growth portfolio; truly maximising the opportunity whilst mitigating the risk.

Pre-order a free copy of JLL's Destination Europe 2015 report: http://bit.ly/destination-europe