Vacancy rates and supply key for retail markets, says C&W

Vacancy rates and supply - particularly shopping centre development - will be the most important drivers of retail property markets and performance in 2011, according to a new report 'European Retail - 10 Key Drivers for 2011' released by global consultant Cushman & Wakefield. The report, which was launched at MAPIC in Cannes, examines the top 10 factors set to have an impact on the outlook for retail trading and retail property in Europe next year.

Divergence or polarisation is the second key theme highlighted in the report. Faced with a patchy global economic recovery, there will be major differences in performance between retail markets, with growth accelerating in some whilst others will continue to see more sluggish trading conditions. Even in locations where a stronger consumer market does emerge, property supply will still be a key factor influencing growth and investor and retailer intentions. Shopping centre completions are expected to remain at low levels for at least one to two years, which will support rents for the better schemes as retailers see their options diminished and are forced to consider existing stock.

In general, retailer demand will remain cautious and selective, but with less development and fewer new options there will be even stronger competition for the best space. For this reason, the prime market will be the main home of the recovery once it does kick in. Generally, the secondary market, whether defined by size or quality, will remain weak in 2011 and is expected to take significantly longer to recover.

John Strachan, head of Global Retail at Cushman & Wakefield, said, 'The right mix of lending conditions, consumer and business confidence is vital to create the overall environment in which recovery can take hold. 2011 will be shaped in the main by a reduction in the availability of good quality space and it will be interesting to see how quickly retailers and developers react to this.'