Savills research reveals that the recovery on Europe’s prime mass market high streets – well-located, high-traffic retail areas that serve a broad consumer base – has gained momentum, with Q3 year-on-year (YoY) rental growth averaging 9.9%, nearly seven times the 1.5% recorded a year earlier.
Prime luxury streets also saw strong rental growth at 5.9% YoY, though mass market high streets led recovery.
This acceleration in rental growth has closed the rental recovery gap with prime rents on key mass market streets now, on average, only 1.8% below Q3 2019 levels. By contrast, luxury rents have fully rebounded, standing 5.2% above 2019 levels.
According to the international real estate advisor, this rental growth has been driven primarily by a contraction in vacancy rates, fuelled by strengthening occupier demand. Over the past 12 months, mass market streets saw a 156 basis point (bps) reduction in vacancy, compared to a 144bps decline for luxury streets. Average vacancy for prime mass market streets is now 3.6%, aligning with 2019 levels.
Several high streets stand out for outperforming the broader trend. In Spain, Madrid’s luxury Ortega y Gasset and mass market Preciados recorded sharp vacancy reductions, 450bps and 730bps below 2019 levels, respectively. London’s Bond and Oxford Streets have also achieved vacancy levels below pre-2019 benchmarks.
Mass market streets in Germany have lagged behind the rest of Europe when it comes to vacancy recovery. Vacancy across its prime streets has been relatively stable since 2021, averaging 8.3%, and while vacancy contracted 40bps in 2024 to 8.2%, it remains almost double that seen across wider Europe (4.5%). While economic challenges persist in the country, the report points to rent adjustments by some landlords, which are driving increased deal activity and positioning the market as a hotspot for activity in 2025.
While luxury streets were initially quicker to recover post-pandemic, their vacancy rates remain, on average, slightly elevated compared to pre-2019 levels, with the research highlighting that this is largely attributed to the more selective approach luxury brands are taking in regards to quality of space.
Larry Brennan, head of European retail agency at Savills, said: 'The strong high street rental performance across Europe’s prime high streets is directly linked to the contraction of vacancy rates. Retailers continue to show commitment to the best quality space in the best pitches – opportunities that are increasingly constrained across an increasing number of prime streets.
'We expect this occupational demand to remain buoyant as retailers’ strategies back bricks and mortar. While challenges persist in certain markets, particularly in central and northern Europe, a more open approach by some landlords to deal structures and rents is beginning to drive increased activity.'
Marie Hickey, director in commercial research at Savills, added: 'Looking ahead to next year, macro-economic conditions will continue to shape the occupier landscape. Mounting uncertainty may temper occupier confidence, but we believe this will have little read through to prime streets.
'Southern Europe will continue to be a lead performer, as will mass market streets in the core markets of London and Paris, with Germany set to emerge as a new hotspot.'
This resurgence in occupational demand is also mirrored in the uptick in European retail investment, which saw transaction volumes across the sector increase by 6% year-on-year to reach €19 bn for the first three quarters of 2024.
Savills predicts that Q4 retail investment volumes will reach approximately €8.5 bi, bringing 2024 year total numbers to just over €27.5 bn, a 15% increase on 2023 volumes.
