EUROPE – A long-term study by Patrizia has found that rents for top European retail properties weather drops in sales well and are also more stable when sales go up again.

Looking at retail properties in top locations in 26 European capitals since 2001, the German real estate company found that only emerging markets such as Warsaw, Budapest and Prague showed an immediate correlation between sales and rents for high-end retail property.

Karin Siebels, head of Patrizia Research, pointed to the disconnect between most high-end retail markets and the general economic situation, with very low vacancy rates in these properties.

Top properties in European high streets have reported only a slight increase in the vacancy rate, currently at 2.2% compared with 1.3% in 2001.

However, in second-tier locations, the rate has increased from 4.5% to around 6% in the same period.

Further, in shopping malls, size is an important competitive advantage, and large retailers in top locations "continue to be present in established markets even in economically weaker years", Siebels said.

This year, she expects rents for top retail properties to increase in Berlin, Hamburg, Munich, Stockholm and Manchester, while other markets will show a stable development – even such regions as Spain and Italy, for which sales forecasts are negative.

A very positive outlook is also given for Vienna, where Austrian EHL Immobilien, a partner of Savills, expects strong development in the retail segment.

At a press conference in Vienna, chief executive Michael Ehlmaier forecast "solid development" in the segment, especially in top locations, despite the "meagre" economic outlook.

B and C locations, on the other hand, will continue to struggle as large retailers move to better locations and smaller ones close down.

Similar to Patrizia, Ehlmaier points out that top retail locations in Vienna are reporting hardly any vacancies despite several new retail centres in the inner city and nearby.

"Vienna is a priority for many large retailers in their expansion plans," Ehlmaier adds.
For the CEE region, EHL stressed the heterogeneity of the market.

Jörg Bitzer, retail expert at EHL Immobilien, said: "In countries like Poland, the Czech Republic or Croatia, we see a very good development, while we are less optimistic for markets like Hungary."