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The UK leads the way as most popular destination for retailer expansion in 2017

London - Moscow

The UK has taken the top spot as the most popular destination for retailers looking to expand their store presence in Europe, the Middle East and Africa (EMEA) in 2017. 65% of retailers surveyed cited the UK as their target market for expansion, according to the latest research from global property advisor, CBRE.

The core markets of Western Europe are top of retailers’ agenda as the most popular destinations for expanding their store network in 2017, despite the political and economic uncertainty in Europe. The UK leads the way as the most attractive retail market in the region and is closely followed by France (43%) Germany (38%), UAE (24%) with Spain, Netherlands and Hungary attracting 19% of respondents, to make up the top five most popular markets for retailer expansion.

CBRE’s research report - How Active are Retailers in EMEA? - found that 51% of international retailers surveyed intend to open up to five stores across EMEA by the end of 2017.  However, the amount of retailers with large-scale expansion plans in 2017 is expected to slow down with 70% of retailers indicating that they expect to open 10 stores or less, reflecting a more cautious approach to their growth plans. Street shops and regional shopping centres remain the most popular formats for expansion with over 80% of retailers choosing these methods of growth.

The survey also found that the biggest concerns for retailer expansion in 2017 are real estate cost escalation which was cited by 57% of retailers. This was closely followed by lack of quality retail space (51%). 

Andrew Phipps, Head of UK & EMEA Retail Research at CBRE, said: 

“Our research shows that retailers are committed to opening new stores and that the UK remains an attractive destination for retailer expansion. However, finding quality retail space in the right location remains a challenge and this has been a consistent rental driver in some of the most prime retail areas across EMEA pushing some of the traditional European retail Centre’s to large rental growth throughout 2016. There is little expectation from retailers that this lack of quality space in key Western markets is likely to decrease in 2017.”

The survey also revealed that 81% of the retailers believe that the growth of online retail will not deter from their physical store expansion plans in Europe. Whilst a small number of retailers believe that the internet will reduce the need for a large store network, they also believe that changes in consumer shopping will allow retailers to generate the same level of sales with fewer stores. This highlights that the role of the physical store is changing, with more stores being used as an opportunity for brands to display experiential retail. 

When it comes to investing in digital technology to improve customer service 78% of retailers have, or are looking at, implementing an integrated store and social media platform. Whilst, 58% of retailers agreed (strongly agreed or agreed) that the use of in-store technology is growing in importance. More surprisingly, a third of retail brands indicated that they have or are looking at implementing interactive displays and fitting rooms, a trend that looks set to be popular in 2017. 

Olesya Dzuba, Director, Head of Research, CBRE, Russia, said: 

“Despite the decline in real income and consumer purchasing power, a number of global and federal retailers are actively expanding their chains both in Moscow and regions. This is partly facilitated by more favourable commercial terms: rental rates declined, payments based on turnover percentage become a common practice, landlords are ready to compensate fit-out costs to some major fashion operators, etc. Another important reason is the increased number of new sites for retailers’ development as the end of development cycle in 2014-2016 resulted in a huge volume of new quality retail space delivered in Moscow (1.6 mn sq m.) and regions (3.2 mn sq m).

“The development of the retail real estate market in regions is a significant factor for expansion of the largest retail chains. Due to poor development of the regional market, the delivery of a quality shopping centre that covers the city's demand for retail almost always attracts attention of large retail operators. This applies both to cities with population over one million people and cities with population of 100-500 thousand people.”