1、MAPIC 2022European Retail Market Outlook 2023Tjard Martinus Head of Retail Research,EMEA Tjard.M2|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Economy moves towards a mild recessionComposite PMI surveys point to a mild contraction in economic output that will last until Q1 2023Source:Oxford Ec

2、onomics(November 2022)8590951001051101151202017201820192020202120222023202420252026GDP index,real,LCU(2015=100)GDP index for the major European economies 2017-2026ForecastFranceGermanyEurozoneSpainUKItaly The economic environment is challenging with the cost of the Covid-19 pandemic,energy prices,in

3、flation and the cost of debt among the key factors affecting the growth outlook.Reaching gas storage targets have diminished the risks of hard rationing over the winter and a sharp slowdown in economic activity,notably for the industrial sector.The Eurozone economy is expected to fall by 1%from peak

4、 to trough this winter.Most European economies are expected to see a mild contraction in economic output that will last until the first half of 2023.While the current recession is cyclical,there are clear downside risks globally to the length and severity of the contraction.3|2022 Jones Lang LaSalle

5、 IP,Inc.All rights reserved.Economy entering the slowdown from a position of strengthThere is a relatively low risk the recession will prompt other crises and self-propagateSource:Refinitiv,JLL(November 2022)Risk-reducing factorsThere is a relatively low risk the recession will prompt other crises.K

6、ey contributing factors include:1.Labour market strength:Unemployment is expected to remain relatively low as various firms continue to recruit staff and offer higher wages.2.Household balance sheet stability:Pandemic savings have largely,but not entirely,been spent.Eurozone household savings are st

7、ill up by 20%on pre-pandemic levels.3.Corporate balance sheet strength:Corporate profits as a percentage of GDP is reasonably high in Europes key retail markets.Corporate debt is manageable,albeit with expectations.4.Limited number of asset bubbles:Housing presents a notable asset risk in various Eu

8、ropean countries.This is considered small due to the strength of local labour markets.Labour market strength-Multi-decade lows in unemployment;high vacancies;rising wagesCorporate balance sheet strength-Corporate profits at record levelsAsset bubbles popping causing a financial crisis?-Only housing

9、presents a bubble risk,and then a small oneHousehold balance sheet stability-Household balance sheets at least as good as pre-covid4|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Economy Long-term inflation expectations remain anchoredMarkets,people and businesses expect inflation to fall back

10、toward normalSource:Oxford Economics(November 2022)Inflation outlook Eurozone,United Kingdom and United StatesForecast High inflation is impacting the consumption strength across Europe after households unleased pent-up demand when pandemic-related restrictions were lifted.Eurozone inflation rose to

11、 a record high of 10.0%year-on-year in September,largely driven by energy price rises and spill-over effects into non-energy components.The Eurozone industrial producer price index,is up by more than 40%year-on-year.Additional upward pressure on consumer prices is expected to last for at least six m

12、onths once wholesale energy prices become less volatile.Oxford Economics expects inflation for both the Eurozone and UK to peak in Q4 2022.Inflation is expected to fall again below the target rate of 2.0%in 2024.-20246810122017201820192020202120222023202420252026Consumer price index change(%yoy)UKEu

13、rozoneUSA5|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Customer demand:drivers and barriers vary by countryMixed retail sales performance expected with some markets seeing resilience in retail spendingSource:Oxford Economics(November 2022)Retail trade volume index for the major European econo

14、mies 2017-2026 European retail markets are seeing a range of drivers and barriers that are influencing consumer demand in the short-term and medium-term.The combined impact varies by market.Retail spending will benefit from the continued recovery in tourism,lifting of Covid-19 measures and further u

15、nwinding of excess savings.Weak consumer confidence and high inflation and gas price rises are constraining consumption,notably among lower income households.Retail spending is moderating in the UK,France and Germany.Markets that are expected to see resilience and some growth include Ireland,Spain,I

16、taly and Poland.Retail sales are forecast to return to solid growth in 2024 in all major European countries.A sharp rise in unemployment would change the outlook to the downside.808590951001051101151201251302017201820192020202120222023202420252026Retail trade volume index(2015=100)ForecastFranceGerm

17、anyEurozoneSpainUKItaly6|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Customer demand:consumers return to physical storesE-commerce is going through a period of contraction,easing pressures on physical retail spendingSource:Oxford Economics,ONS,Eurostat,Centre for Retail Research,Statista,JLL(

18、November 2022)Consumers have moved their retail spending towards online channels during the Covid-19 pandemic,which has seen online retail spending rise to record-high levels across Europe.The re-opening of economies has allowed consumers to return to physical stores,prompting a gradual but steady d

19、ecline in online retail spending in most European countries.Increased cost for fulfilment of online ordered goods is triggering retailers to introduce return-fees and encourage free returns in physical stores.Some online retailers have paused expansion to improve margins.While online sales remain el

20、evated from pre-pandemic levels,the current fall in online retail spending is easing pressures on physical retail spending.Considering the UK,Europes largest online retail market,online sales growth is slowing,which points to a market equilibrium.Share of online sales as a proportion of total retail

21、 2017-20250%5%10%15%20%25%30%35%EUexcluding UKGermanySpainFranceItalyNetherlandsUnitedKingdomShare of online sales as a proportion of total annual retail sales(%)2017-20192020-2021Forecast 2022-20257|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Retailer demand:Navigating through inflation via

22、diversificationMarkets strengthens resilience and offers opportunities for growthSource:Oxford Economics(November 2022);Note:Paris,London and Manchester are based on a larger geographical area.While the economic growth outlook for Europe sets out a mild recession,significant risks are present due to

23、 several external events that could potentially affect economic activity.Navigating the current retail landscape is challenging and relying on a small number of markets for generating sales significantly increases the risk of loosing income due to potential negative events.Well-capitalised retailers

24、 continue to open new stores across Europes largest cities to mitigate operational risks of a potential sharp downturn.Entering new markets also creates new opportunities for growth for retailers with an attractive proposition.Given the importance of Europes largest cities,in terms of economic outpu

25、t,retail spending and spread across geographies,international expansion is an efficient route to increasing the risk-adjusted returns.Distribution of the economic output in 2021 across Europes Nuts-3 regions 050,000100,000150,000200,000250,000300,000350,000400,000450,000500,000GDP,nominal,EURTop 50

26、Nuts-3 regions by GDPOther Nuts-3 areasLargest region/citySmallest region/cityEuropes 50 largest regions and cities represent:30%of Europes economic output.27%of all households with an income of 100,000 or more.25%of the total retail spending across the region.8|2022 Jones Lang LaSalle IP,Inc.All ri

27、ghts reserved.Retailer demand:unlocking new opportunities for growthWell-capitalized retailers are looking beyond the current slow-down in retail spendingSource:JLL(November 2022)Retail leasing activity across Europes key retail destinations was robust during the first half of 2022.High inflation an

28、d rising energy prices has slowed leasing activity considerably in markets such as Germany and the UK.Some retailers consider the increased energy costs as a second-rent on top of their lease.Demand for quality retail space remained strong in southern European countries,including Spain,Portugal and

29、Italy.Some international brands agreed to longer lease terms.The pandemic has accelerated retailer initiatives to right-size store portfolios and introduce new formats to unlock growth opportunities.Well-capitalized retailers are best placed to continue opening new stores and introduce new formats d

30、uring the current slowdown in retail spending.Retail leasing market activityRetailer demand for space is pivoting towards experience-led high-quality shopping destinations and accessible convenience orientated retail places.Continued consolidation&optimization of networks Major retailers have accele

31、rated right-sizing of store portfolios Upgrades of remaining storesNew formats and innovation Diversification and moves into new categories and partnerships Growth of subscription models,and loyalty programsOpportunistic growth Well-capitalized mature and new brands still expanding Fast and light co

32、ncepts;lower cap-ex,test and demonstrate market Push towards more flexible deal structures,including step-rents9|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Retail demand:Prime space has become more affordableThis years Christmas trading period will be crucial for retailers to absorb rising o

33、ccupational costs Source:JLL(November 2022)Prime retail rents across many of Europes best retail locations have been lowered as a result of Covid-19.The sharp increase in energy costs during Q3 this year,coupled with broader inflation,has placed more emphasis on affordability of rents.Most retailers

34、 have paid this years increases in occupational costs.However,retailers remain cautious committing to higher rents for prime retail space.Retail sales during the Christmas trading period will be crucial.While rents may continue to move upwards,due to indexation,if affordability becomes an issue due

35、to lagging sales,retailers may look to negotiate rents or trigger break clauses.For well-capitalised retailers looking beyond the current slowdown,the current market offers opportunities to access quality stock at more favourable lease terms.European prime retail rent indices 2001-202210012014016018

36、0200220240Prime rent index,nominal,LCU(Q1 2001=100)High StreetShopping CentreRetail Warehouse-14%-12%-8%10|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Retail demand:top destinations for international retailers Paris,Zurich and London are Europes most expensive destinations for international b

37、randsSource:JLL(November 2022)Prime rent(EUR/sqm/p.a.)Top 20 most expensive retail destinations for international retailers in Europe05,00010,00015,00020,000Oslo-Karl Johans GatePrague-Na PrikopeDublin-Grafton StreetLyon-Rue de la RpubliqueAmsterdam-KalverstraatCologne-SchildergasseBarcelona-Portal

38、de LAngelMadrid-PreciadosDusseldorf-SchadowstraeStuttgart-KnigstraeHamburg-SpitalerstraeFrankfurt-ZeilRome-Via del CorsoBerlin-TauentzienstraeMilan-Corso Vittorio EmanueleMunich-KaufingerstraeGeneva-Rue du RhoneLondon-Oxford StreetZurich-BahnhofstrasseParis-Avenue des Champs-Elyses11|2022 Jones Lang

39、 LaSalle IP,Inc.All rights reserved.Retail demand:top destinations for luxury retailers Luxury brands pay highest rents in London,Paris,Zurich and Milan across EuropeSource:JLL(November 2022)Top 20 most expensive retail destinations for luxury retailers in Europe05,00010,00015,00020,000Oslo-Karl Joh

40、ans GateAmsterdam-PC HooftstraatMarseille-Rue GrignanPrague-ParizskaStuttgart-StiftstraeStockholm-BibloteksgatanDublin-Grafton StreetFrankfurt-GoethestraeHamburg-Neuer WallMadrid-SerranoBarcelona-Passeig de GraciaBerlin-KurfrstendammDusseldorf-KnigsalleeMunich-MaximilianstraeGeneva-Rue du RhoneRome-

41、Via CondottiMilan-Via MontenapoleoneZurich-BahnhofstrasseParis-Avenue MontaigneLondon-New Bond StreetPrime rent(EUR/sqm/p.a.)12|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Investment market:retail investment activity slows European retail transaction volumes for 2022 on track to end above 202

42、1 volumesSource:JLL(November 2022);Note:The analysis excludes any investment deal less than 5 million in value.After a solid start to 2022,European retail investment activity has started to slow as a result of rising financing cost and economic uncertainty.European retail investment volumes for the

43、first three quarters of 2022 combined have increased by 45%year-on-year to 29.2 billion.Considering Q3 2022,European retail investment volumes have risen by 6%year-on-year to 8.6 billion.With several major retail transactions expected to close during the final quarter of this year,European retail in

44、vestment volumes for 2022 are on track to end above 2021 volumes.The outlook for 2023 is uncertain as investment activity will partly depend on the strength of retail sales during the Christmas trading period.Affordability of retail rents will be crucial as it has the potential to affect yields and

45、pricing of retail stock.European retail real estate investment volumes05,00010,00015,00020,000Q1 2007Q3 2007Q1 2008Q3 2008Q1 2009Q3 2009Q1 2010Q3 2010Q1 2011Q3 2011Q1 2012Q3 2012Q1 2013Q3 2013Q1 2014Q3 2014Q1 2015Q3 2015Q1 2016Q3 2016Q1 2017Q3 2017Q1 2018Q3 2018Q1 2019Q3 2019Q1 2020Q3 2020Q1 2021Q3

46、2021Q1 2022Q3 2022Retail investment volumes(million)13|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Investment Market:core markets attract lion share of capital The UK,Germany and France remain Europes most liquid retail investment marketsSource:JLL(November 2022);Note:The analysis excludes an

47、y investment deal less than 5 million in value.The UK,Germany and France are Europes largest destinations for capital targeting retail real estate in 2021 and Q1-Q3 2022.Retail investment volumes in the UK increased by 31%year-on-year to 6.5 for the first three quarters of 2022,making it Europes lar

48、gest retail investment market.Notable year-on-year increases in retail investment volumes for Q1-Q3 2022 have also been observed in France,Spain and Finland.French retail investment volumes for the first three quarters increased by 156%year-on-year to 4.5 billion.Volumes grew by 439%year-on-year to

49、3.8 billion in Spain,notably driven by the sale of a portfolio of bank branches,worth 2.0 billion by Merlin Properties to its main occupier BBVA.Finlands investment volumes rose by 305%year-on-year to 952 million.Retail investment volumes by countryGermany,25%United Kingdom,24%France,9%Italy,6%Nethe

50、rlands,5%Norway,4%Sweden,4%Austria,4%Spain,3%Poland,3%Other,15%United Kingdom,22%Germany,18%France,16%Spain,13%Netherlands,3%Finland,3%Denmark,3%Norway,3%Poland,3%Sweden,2%Other,13%2021Q1-Q3 202214|2022 Jones Lang LaSalle IP,Inc.All rights reserved.54%45%40%36%38%31%33%27%28%16%23%25%28%28%27%19%20%

51、28%19%22%24%24%17%22%23%29%26%9%8%6%6%10%12%21%19%11%3%1%2%4%4%6%6%5%5%0%10%20%30%40%50%60%70%80%90%100%20142015201620172018201920202021Q1-Q32022Share of total retail investment volumes(%)Investment Market:demand for different retail assets broadens Shopping centre,high street and retail warehouse a

52、ssets attract a nearly equal share of capitalSource:JLL(November 2022);Note:The analysis excludes any investment deal less than 5 million in value.Shopping centres accounted for the largest share of European retail investment volumes in Q1-Q3 2022.Pockets of liquidity have emerged,including assets o

53、ffering defensive qualities,divestments from investors looking to raise capital and secondary stock with the intention for redevelopment,notably in the UK.The share of high street investment rose due to BBVAs 2.0 million bank branch portfolio acquisition.Investors remain focussed on a select number

54、of high street assets and locations.Investors continue to target high-quality retail parks,often anchored by one or two grocery operators.Some investors are moving ahead without additional financing.Rising interest rates and a lower number of large supermarket portfolios offered to the market impact

55、ed the share of grocery real estate investment so far in 2022.European retail investment volumes by asset typeShopping CentreHigh StreetRetail WarehouseSupermarketsFactory Outlet CentreOther15|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Investment Market:high-quality assets will remain in dem

56、and Some investors believe that quality retail assets are attractively priced and could offer solid returnsSource:JLL;Bloomberg(November 2022)Rising financing cost and perceived risk to income has started to affect pricing for quality commercial real estate assets across Europe.As many of the best r

57、etail assets continue to report stable income,the reported yield shifts for prime retail stock have been moderate so far.However,many institutional investors have paused real estate acquisition processes to gain clarity on how the next 12 months will evolve.While activity in the European retail inve

58、stment market is slowing,good-quality assets will remain in demand.Some investors believe that quality retail assets are attractively priced and could offer solid returns.The European shopping centreinvestment market is going through a period of price discovery.Two large transactions are anticipated

59、 to the provide the market with benchmark yields for quality shopping centres.Weighted prime European real estate yields-1012345678Q1 2007Q3 2007Q1 2008Q3 2008Q1 2009Q3 2009Q1 2010Q3 2010Q1 2011Q3 2011Q1 2012Q3 2012Q1 2013Q3 2013Q1 2014Q3 2014Q1 2015Q3 2015Q1 2016Q3 2016Q1 2017Q3 2017Q1 2018Q3 2018Q

60、1 2019Q3 2019Q1 2020Q3 2020Q1 2021Q3 2021Q1 2022Q3 2022Net initial yields(%,weighted)Shopping centresRetail warehouseLogisticsHigh streetOfficesEuro Swap Rate16|2022 Jones Lang LaSalle IP,Inc.All rights reserved.Outlook:prime retail space has become attractively priced High inflation and response fr

61、om central banks and governments shape the short-term outlookSource:JLL(November 2022)Economy The European region is expected to see a mild contraction in economic output that will last until the first half of 2023.A strong labour market,stability in household balance sheets,high profits among most

62、major corporates and limited risks of asset bubbles popping,all help to lower the risk for the current slowdown to prompt other crises.However,there are clear downside risks to the length and severity of the contraction,that could be triggered by major external events globally.Inflation for both the

63、 Eurozone and UK is expected to peak in Q4 2022 as gas price increases will moderate and overall demand softens.Inflation is expected to fall below the target rate of 2.0%in 2024.High inflation is squeezing real incomes and constrains retail spending.Some markets are forecast to see resilience and g

64、rowth in retail sales.Retail sales are forecast to return to solid growth in 2024 in all major European countries.Retailer Demand Various retailers are moving ahead with new store openings.However,gas price volatility has slowed leasing activity in some markets as retailers assess the change in oper

65、ational costs.Various international brands are navigating the current retail landscape through diversification of store portfolios across markets,entering new cities and testing new store formats.Prime retail rents across many of Europes best retail locations have been lowered as a result of Covid-1

66、9.This has allowed various retailers to absorb recent increases in occupational costs.The Christmas trading period will be crucial.Rents are likely to rise due to indexation.If affordability becomes an issue,retailers may look to negotiate rents or trigger break clauses.The current slowdown is accel

67、erating the polarisation in demand for prime and weaker retail spaces.Some well-capitalised retailers may look beyond the current slowdown and aim for new opportunities to access quality stock.Investment Market After a solid start to 2022,European retail investment activity has started to slow due t

68、o rising financing cost and economic uncertainty.As some of the best retail assets continue to report stable income,yields shifts for prime retail stock have been moderate so far.With several major retail transactions expected to close during the final quarter of this year,European retail investment

69、 volumes for 2022 are on track to end above 2021 volumes.The outlook for 2023 is uncertain as investment activity will partly depend on the strength of retail sales during the Christmas trading period.Affordability of retail rents will be crucial.Many institutional investors have paused real estate

70、acquisition processes to gain clarity on how the next 12 months will evolve.Positively,a select number of new sources of capital are emerging.Some investors believe that quality retail assets are attractively priced and could offer solid returns in the long-term.DisclaimerThe information contained i

71、n this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal.All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential.Reproduction of any part of this document is authorized only to

72、the extent necessary for its evaluation.It is not to be shown to any third party without the prior written authorization of JonesLang LaSalle.All information contained herein is from sources deemed reliable;however,no representation or warranty is made as to the accuracy thereof.17|2022 Jones Lang LaSalle IP,Inc.All rights reserved.