Posted by: Walter Goossens
Head of Retail Leasing, Belgium

Jones Lang LaSalle Belgium just issued 3 retail maps: Antwerp, Brussels Uptown and Brussels Downtown.
Discover those exciting shopping areas and their retail offer by clicking on the maps.
 
Antwerp, the fashion capital of Flanders
Antwerp is renowned for its legendary expertise and know-how as a centre for the diamond industry but the fashion world discovered Antwerp thanks to the legendary creations of the Antwerp Six, who propelled the city to the forefront of the international scene with the reputation of being avant-garde and innovative. The studios of those Belgian designers are located in the fashion district between Groenplaats and the Museum of Fine Arts.
The stores of the international luxury labels are located in the Quartier Latin in Huidevetterstraat, Schuttershofstraat and Hopland. On the other hand, the larger mainstream brands such as Zara and H&M are to be found on the famous pedestrian Meir. [Click here for map]

Brussels, from Uptown to Downtown:
The Brussels retail scene is characterized by a very diverse consumer market with a large expatriate community from all corners of Europe. As such the city is often used by international retailers as a test case to launch new brands or concepts.
The retail market can be divided into two core areas; firstly the “Haut de la ville” – Uptown- comprising Avenue Louise, Avenue de la Toison d’Or and the Boulevard de Waterloo with the most high-end retailers such as Gucci, Dior, Louis Vuitton and famous Belgian designers. New luxury retailers such as Abercrombie &Fitch, and Jimmy Choo will be installing their brands on the Boulevard de Waterloo by the end of the year 2011.
The “Bas de la ville”- Downtown- features larger mainstream international and national retailers such as Zara, Mexx and H&M. These are largely concentrated in the Rue Neuve; the busiest shopping high street in Belgium. Around the southern end of Rue Neuve, the redevelopment of historical shopping galleries such as Centre Monnaie and GalerieAnspach are extending the retail-pull from the Rue Neuve further south to Rue des Fripiers.  [Click for Brussels Uptown and Downtown]

Posted by: Magnus Danneck

Associate Director, Germany Marketing

The global market for luxury goods has emerged from the financial crisis significantly faster than expected. The likes of Burberry, Gucci Group, Hermès, LVMH, Polo Ralph Lauren, Prada and Richemont have recently reported double-digit sales growth or even record annual sales. A look at the latest annual reports published by the leading firms impressively shows that the sales contributed by companymanaged shop-in-shops and stores have risen considerably. Almost all renowned luxury brands have been making substantial investments in their own retail structures in recent years, thereby lessening their dependence on wholesale business. Despite the booming online offerings, stationary retailing obviously remains a very important success factor especially in the luxury segment.

Therefore luxury goods retailing is also unique from a real estate perspective. Luxury goods purveyors are currently targeting their expansion drives on the emerging markets where booming local economies are creating a new class of high-income consumers, resulting in a clear increase in demand for luxury goods. At the same time luxury firms have also resumed investing in their mature western markets. Given that all renowned labels have long had a presence on western Europe’s essential luxury shopping streets, their renewed interest in property primarily relates to extensive refurbishments and expansions of existing stores. In addition, firms are working to optimise their locations and networks.

An analysis of this development reveals that substantial sums have been invested in raising space productivity. All renowned luxury goods purveyors continue to invest in the speed of their process chains which is key to managing their company-operated stores efficiently. Apart from the quality of the collection and the brand management activities, success in luxury goods retailing increasingly hinges on the consistent use of all sales channels and the building of networks of company-managed bricks-and-mortar stores. Many firms are currently tapping the stock market for the required capital. In addition, luxury labels are increasingly making use of the networks of the major luxury brand holdings.

In our new report “Glitter and glamour shining brightly” we have brought to light that London’s New Bond Street is the most expensive luxury shopping street in western Europe. Followers-up are Avenue Montaigne in Paris and Stoleshnikov Lane, the top location in Moscow. Hardly surprisingly, the highest density in terms of international luxury labels can be found in Paris. Only London has a similar density of luxury stores. Milan completes the top three, followed by Moscow and Rome.

Taken as a whole the luxury sector is the most internationalised in the retail market, with brands adopting true global strategies. In these days luxury retailers are responding to the return in consumer confidence with healthy expansion plans. Definitely that increased demand for prime space in the best locations is forcing rents up. Other retailers are also looking to benefit from the proximity to famous top-level brands, and this additional demand for scarce showroom space is placing even more pressure on premiums. To draw a conclusion luxury brands not only inspire the most fashionable people – they offer dazzling trends from a property point of view as well.

Read more about the density and presence of the most famous luxury brands in Europe’s metropolitan centres in our latest report “Glitter and glamour shining brightly – The 100 most renowned luxury brands and their presence in Europe’s metropolitan centres”.

Posted By Jeremy Eddy
Director, European Retail Capital Markets
Jones Lang LaSalle

Our New Retail Research ‘Outperforming in European Retail Capital Markets’ identifies six key trends that will shape the European retail investment market during 2011:

1.    Multi-speed market acceleration – As the polarisation in pricing between institutional and non-institutional retail real estate continues, the strength of liability-driven investors has resulted in yield compression for prime, well leased properties offering long term security. The arbitrage between bonds and real estate looks attractive for equity investors, which may cause further yield compression for core product, resulting in equity players locking down returns to match liabilities with a perception that income will remain secure.

For leveraged investors, the market might appear attractive now with low interest rates and relatively attractive pricing. This kind of market is often seen as the ‘playground’ for the trading investor, with shorter hold periods and the consequent need for a sure-fire exit strategy. However, free cash-flows could be eroded as a result of rising European interest rates and upon exit the arbitrage against debt may result in higher exit yields and reduced profit.  In addition, LTV’s and debt availability remain constrained.

2.    Return of the missing investors – Over the past 12-24 months at the core end of the investor spectrum, the weight of money from institutional investors and new sovereign wealth capital entering the market has driven yield compression. Meanwhile, ‘value add’ assets, usually the domain of asset management orientated sector specialists and third party managed funds, have been impacted by a lack of investor depth that would typically target this product type. The return of this “squeezed middle” between the institutional money and the private equity groups should result in yield compression of core-plus and value-added assets during 2011.

The return of this investor group in 2011 will broaden demand for geographic spread and asset quality. Opportunistic groups, which at the height of the market would have sought out emerging geographies or distressed situations that could deliver their return requirements, have been able to play the ‘value-add arena’.  However, more money focusing on value-add opportunities could lead to opportunistic groups being squeezed out.

3.    The Holy Grail of Asset Management – Investors will rely on asset management to drive returns, as they are not able to rely on yield compression or rental growth in the majority of European countries. Shopping centre and retail park owners will need to think long term about ensuring the centre is adapted to the evolving clientele within its catchment.  Failing to establish if a scheme is a ‘destination’ or ‘convenience’ asset will result in a struggle to drive returns as the increasingly competitive consumer landscape continues to evolve via online retail, new technologies and consumers move away from pure transaction-led retail experiences.

4.    Ripple Effect – Demand from core investors will continue, however limited availability of product in mature markets will force them to become more flexible on structuring deals and move up the risk spectrum in order to secure the best assets or widen their geographical reach. This will have a ripple effect in 2011 resulting in increased activity in a broader range of European capitals and major cities, with a focus on dominant assets with the most robust income profiles.

During 2011 we can expect market activity to move away from the UK, France and Germany, who collectively accounted for two thirds of activity in 2010. Cities such as Stockholm, Warsaw, Moscow and Barcelona will be the first to benefit from this geographical shift. These markets, which have historically seen stronger domestic appetite, will increasingly appeal to cross border investors.  In the retail domain many investors are thinking city exposure rather than country exposure.

5.    Third Party Managed Funds – With an improvement in appetite for third party managed funds, those which demonstrated good performance over the past two years, those that provide sector specialism or are tax efficient for German investors and those that provide an equity alignment and a revised fee basis are expected to attract the most inward investment.

6.    Adjusting Expectations – The future holds limited rental and turnover growth prospects; retailer expansion will remain targeted and debt will continue to be constrained and fairly heavily priced. This will either result in adjustments in pricing, which is unlikely, or investors will have to review their performance expectations.

A realignment of expectations is already underway with the most recent equity raises targeting lower returns compared to the last cycle. This landscape has also resulted in a number of opportunity groups raising new funds and acting as discretionary managers for private equity groups or reviewing existing raised funds, lowering expectations from 20 percent IRRs to mid-teens”.

2011 will see the return of targeted development financing by investors, once authorisations and principal leasing has been achieved. There will be a balancing of lower returns in core markets with greater exposure to the high growth European economies. Transaction levels will match or even exceed 2010 levels as the market expands geographically and confidence returns to the centre ground where return requirements necessitate value enhancement opportunities resulting in a broader spread of asset quality, beyond the prime focus of 2010.

Posted by: Stephen Daniels
Senior Researcher, Retail Research & Consulting
Jones Lang LaSalle EMEA Research

Over 60 managers of some of the best Shopping Centres in the UK gave Jones Lang LaSalle some thoughts on the short and long term future of their industry. The hot discussion points were the ongoing migration to online, improving customer service, maximising digital media and, of course, continuing to deal with the aftermath of the economic recession.

The need to get things right now was a clear priority. Addressing unprecedented levels of voids and a continued need to balance rental levels with incentives were logically high on the agenda.

But there was a real sense that the hard work in terms of cost saving has been done, or at least the longer term costs have been sufficiently postponed. Maintaining these reduced costs would be the next challenge – especially for those with one eye on the future.

Here are the top 5 challenges these shopping centre managers think they will face over the next decade:

1)      Enhancing the Experience of Shoppers

This was a big theme, with most managers viewing customer service, both in-store and at the shopping centre in general, as the best way to serve a consumer who wants an increasingly fulfilling retail experience.

“Our shopping centres need to be delivering better services from choice of retailer to car parks. The whole shopping centre needs to be geared to compete against the large regional centres and convenience of internet purchasing”

2)      New Technology

There was acknowledgement that this is developing rapidly (particularly smart phone technology) but a real call for education as to how it all directly impacts retail. Digital payment systems (such as RFID) are being considered by some, but the correct technology to embrace, and namely the best technology to suit their scheme, was the question left hanging in the air.

3)      Online Migration

Online is, in general, still seen as a threat…

“Maintaining and finding new USP’s for bricks and mortar shopping centres to remain competitive in the face of increasing threat posed by on-line retail is very important”

But the opportunities to embrace this digital online world from a marketing perspective are starting to creep into the conscience, as explained in the next theme….

4)      Embrace Digital Media

There are commercial benefits abound for shopping centres to become involved in virtual conversations about the scheme as a brand in its own right.  But the question ‘are we missing a trick?’ was not an uncommon one. As with New Technology, commercial education is the key. Consider here that just 10% of shopping centres at the conference were represented on Facebook, yet over 80% of managers have a personal page on the social networking site. Twitter is equally off the commercial radar, but there’s a view it’s becoming too important to ignore.

5)      Attract new consumer groups, or stick to the local market?

As discussed in our Retail 2020 report, there are significant lifestyle and age/demographic changes set to occur during the next decade. However location is still top of the agenda when it comes to scheme market positioning for shopping centre managers. ‘Serve your local catchment’ is still the key message. But understanding the changes happening to those people in the catchment’ is perhaps an even more important one.

So a challenging time is ahead, but one of opportunities nonetheless. Of course, engagement with stakeholders (i.e. the landlord) has to be given consideration, with the closing parenthesis ‘who will pay for the future?’ a sombre afterthought. And with much of the UK’s shopping centre stock ageing and in need of maintenance or refurbishment, prioritising budgets for modernising is an added challenge.

But remember, the very best schemes will find innovative ways of marketing their shopping centre and scaling operations to find new economies suited to the future consumer.

The need to get things right now was a clear priority.