French fond of retail parks
In France, 2006 was a record year for retail development and this year it is expected to perform even better. Retail parks – which successfully managed to shed their poor quality image – and shopping centres – which are increasingly planned in city centres – are the engines of growth.
Elsevier Food International Vol.10, No.2 May 2007
Anika Michalowska
In France, 2006 was a record year for retail development and this year it is expected to perform even better. Retail parks – which successfully managed to shed their poor quality image – and shopping centres – which are increasingly planned in city centres – are the engines of growth.
Just as in the rest of Europe, retail property prices have shot up thanks to the increased demand for property. As a result, yields have fallen to borrowing levels. Investors buying now have to rely on rental growth because yields are not expected to fall that much further. There is a growing interest from investors due to rising rental values – in tune with levels known in office markets – which have proved particularly buoyant. Especially in retail parks which have successfully shaken off their poor image.
The opening last year of the new retail park at Carré Sud, near Nîmes in the South of France, was also the kick off for a new generation of retail parks in France. Unlike the anarchic development of retail parks in the past, Carré Sud symbolises a new development of an integrated retail area on a peripheral location, managed by one park manager.
According to Procos (the French real estate organisation for specialised retailers), there are currently 31 of such new generation retail parks in France. Such parks also represent 45 per cent of the 2.5 million square metres of the planned projects in France. Like Carré Sud last year, this year Family Village – a new retail park in Aubergenville in the southwest of Paris (47,700 m2) – is expected to make the news.
Many branded retailers which traditionally prefer the high streets or shopping malls – such as C&A (fashion) or optical Afflelou – are testing the new French retail parks. “In the last two years, the number of retail parks has exploded in France,” remarks Aude Le Vaillant, in charge of communication at Procos. “The market of retail parks has switched from a developers’ to an investors’ market and that explains its dynamism. The new retail parks are a profitable investment.”
In 2006, on prime locations, rental values reached the level of €400/m2 for surfaces up to 300 m2. To compare: on average the rental price in France is €180 per m2. And this year the increase in rental value is likely to continue. The quality focus on new retail parks is therefore paying off. To support this trend, the property consultancy Cushman & Wakefield is among the initiators of the ‘Valor Park’ label, which every year awards retail parks which put the biggest focus on quality (in environment, architecture, etc.). “An upward pressure on rents could be a key feature for 2007 in the retail park sector as well as a downward pressure on commercial centres and high streets,” says Christian Dubois, general manager of the retail department at Cushman & Wakefield France.
Risk of saturation
New retail parks in France flourish against a background of a strong demand for retail space in France in general. Especially for towns of more than 50,000 inhabitants. Shopping centres also benefit from this. In 2006, a record number of 3.7 million m2 of new retail space was created in France, three quarters of which concerns shopping centres (either new malls or extension of existing ones). Home equipment accounted for 34 per cent of the additions in 2006, while food accounted for 26 per cent, culture/leisure for ten per cent, services for seven per cent and personal equipment for seven per cent.
The record year 2006 featured 120 renovation projects (totalling 920,000 m2) and the creation of 54 new shopping centres. French developers such as Espace Expansion, Ségécé and Mercialys (a subsidiary of the French retailer Group Casino) have acquired a definite expertise in shopping centre renovation.
Unlike retail parks, however, shopping centres run a risk of over saturation. “There is an inflation of new projects,” remarks Louis Meyniel, manager of Retail Department at the real estate services company CB Richard Ellis France. This risk factor will not be reduced, as for this year Procos lists 543 new retail projects – to compare with 419 in the record year 2006 – and 150 of these are shopping centres and 238 are retail parks. “The problem is that there are increasing difficulties in getting permits,” says Christian Dubois.
Going downtown
Developers of shopping centres in France are increasingly eying town centres. A development which benefits retail development. “This is indeed a big trend in France: shopping centres are going back to the town centre,” says Dubois.
For instance, Rue de la République in Marseille, totally rehabilitated, is becoming Marseille’s major retail high street. H&M has just opened a flagship store there and Monoprix is expected to sign in. Another example: in the historical centre of Angoulême, French developer and shopping centre manager Ségécé is to open ‘Galerie du Champ de Mars’ in autumn 2007. This is a new 15,500 m2 shopping centre, with retailers such as Monoprix, H&M and Nature et Découverte. French developer Apsys intends – with the 18,000 m2 ‘Ruban Bleu’ shopping centre in Saint Nazaire – to create a link between the city centre and the harbour. The development of downtown shopping centres is welcomed by many branded retailers which otherwise would have not been able to move into the city due to lack of available and affordable retail space. Such shopping centres are particularly interesting for retail concepts in home equipment, beauty and fashion accessories. Zara Home made its first entry in France with a store in the shopping centre of Boulogne Billancourt, a smart district southwest of Paris. An increasing number of brands are keen to open their own stores such as Samsonite, Lee, and Nokia. However, rental rates remain stable averaging €636/m2/year in city centres, €100 to €200 in the periphery and €1,000 to €2,000 per m2 per year for prime locations in large agglomerates such as Bordeaux, Lyon, Lille, Marseille, Nice, Toulouse or Strasbourg. Paris is a league of its own (see sidebar) with annual rental values per m2 between €3,500 to €9,500.
Major future projects for 2009 include ‘Lyon Confluence’, a mixed leisure and retail project on 150 ha in Lyon. Developed by Unibail/Espace Expansion, Lyon Confluence comprises 15 medium-sized stores with a 3,375 m2 Monoprix, 60 boutiques and 15 restaurants. Also in Lyon (in Vaux-en-Velin, a district of Lyon) French developer Altarea is to open ‘Carré de Soie’. This 25 ha retail project will have eight medium-sized stores, some 50 boutiques and restaurants. Jardiland, Castorama, Go Sport and Maison de la Déco are among the retailers that have already signed in.
An active retail market in Paris
The retail property market in Paris was very active throughout 2006 although the sector is becoming increasingly difficult to grasp. This is due to the market being constantly reshuffled to reconcile retailers’ expansion strategies, investors’ expectations and changes in consumer behaviour. Demand continues to concentrate in highly prestigious locations and busy shopping streets. “Unfortunately for the big-name retailers, these prime sites are scarce,” states Louis Meyniel, manager of the Retail department at CBRE France. “Even sites that simply meet their ever-more demanding requirements are few and far between.”
There is a definite trend for large food chains to move back to the heart of each Parisian arrondissement with smaller units (80 to 300m2). Group Monoprix plans to open some twenty Monop’ stores in 2007. The concept was inaugurated in early 2005 as a convenience store and there are currently ten such Monop’ stores in Paris. The 300 m2 Monop’ stores are open six days a week, from 9 a.m. to 12 p.m. and offer some 4,500 items. They are located in districts with a population density and heavy pedestrian passage. Auchan is testing a discount concept called Simply Market with the intention of turning some of its Atac supermarkets into Simply Market stores.
“The good health of the luxury market and the increase of the demand from foreign brands for flagships have been the key feature of the Parisian market,” says Christian Dubois, managing director of the Retail Department at Cushman & Wakefield France. The average rental value in Paris, as reported by the French property data source ‘Argus de l’Enseigne’ remained relatively stable at an average €1,085€/m2 as of November 2006 (€1060 a year earlier) but rental values for prime sites on the Champs Elysées (which attracts 120 million visitors per year) are heading toward the symbolic threshold of €10,000 per m2 annually, making it the most expensive street in France.
One threat on the otherwise positive picture is the ever-increasing interventionism of local authorities: H&M has been refused an authorisation to open a 3,430 m2 flagship store on the Champs Elysées by the Mayor of Paris.
Anika Michalowska
In France, 2006 was a record year for retail development and this year it is expected to perform even better. Retail parks – which successfully managed to shed their poor quality image – and shopping centres – which are increasingly planned in city centres – are the engines of growth.
Just as in the rest of Europe, retail property prices have shot up thanks to the increased demand for property. As a result, yields have fallen to borrowing levels. Investors buying now have to rely on rental growth because yields are not expected to fall that much further. There is a growing interest from investors due to rising rental values – in tune with levels known in office markets – which have proved particularly buoyant. Especially in retail parks which have successfully shaken off their poor image.
The opening last year of the new retail park at Carré Sud, near Nîmes in the South of France, was also the kick off for a new generation of retail parks in France. Unlike the anarchic development of retail parks in the past, Carré Sud symbolises a new development of an integrated retail area on a peripheral location, managed by one park manager. According to Procos (the French real estate organisation for specialised retailers), there are currently 31 of such new generation retail parks in France. Such parks also represent 45 per cent of the 2.5 million square metres of the planned projects in France. Like Carré Sud last year, this year Family Village – a new retail park in Aubergenville in the southwest of Paris (47,700 m2) – is expected to make the news.
Many branded retailers which traditionally prefer the high streets or shopping malls – such as C&A (fashion) or optical Afflelou – are testing the new French retail parks. “In the last two years, the number of retail parks has exploded in France,” remarks Aude Le Vaillant, in charge of communication at Procos. “The market of retail parks has switched from a developers’ to an investors’ market and that explains its dynamism. The new retail parks are a profitable investment.”
In 2006, on prime locations, rental values reached the level of €400/m2 for surfaces up to 300 m2. To compare: on average the rental price in France is €180 per m2. And this year the increase in rental value is likely to continue. The quality focus on new retail parks is therefore paying off. To support this trend, the property consultancy Cushman & Wakefield is among the initiators of the ‘Valor Park’ label, which every year awards retail parks which put the biggest focus on quality (in environment, architecture, etc.). “An upward pressure on rents could be a key feature for 2007 in the retail park sector as well as a downward pressure on commercial centres and high streets,” says Christian Dubois, general manager of the retail department at Cushman & Wakefield France.
Risk of saturation
New retail parks in France flourish against a background of a strong demand for retail space in France in general. Especially for towns of more than 50,000 inhabitants. Shopping centres also benefit from this. In 2006, a record number of 3.7 million m2 of new retail space was created in France, three quarters of which concerns shopping centres (either new malls or extension of existing ones). Home equipment accounted for 34 per cent of the additions in 2006, while food accounted for 26 per cent, culture/leisure for ten per cent, services for seven per cent and personal equipment for seven per cent. The record year 2006 featured 120 renovation projects (totalling 920,000 m2) and the creation of 54 new shopping centres. French developers such as Espace Expansion, Ségécé and Mercialys (a subsidiary of the French retailer Group Casino) have acquired a definite expertise in shopping centre renovation.
Unlike retail parks, however, shopping centres run a risk of over saturation. “There is an inflation of new projects,” remarks Louis Meyniel, manager of Retail Department at the real estate services company CB Richard Ellis France. This risk factor will not be reduced, as for this year Procos lists 543 new retail projects – to compare with 419 in the record year 2006 – and 150 of these are shopping centres and 238 are retail parks. “The problem is that there are increasing difficulties in getting permits,” says Christian Dubois.
Going downtown
Developers of shopping centres in France are increasingly eying town centres. A development which benefits retail development. “This is indeed a big trend in France: shopping centres are going back to the town centre,” says Dubois.
For instance, Rue de la République in Marseille, totally rehabilitated, is becoming Marseille’s major retail high street. H&M has just opened a flagship store there and Monoprix is expected to sign in. Another example: in the historical centre of Angoulême, French developer and shopping centre manager Ségécé is to open ‘Galerie du Champ de Mars’ in autumn 2007. This is a new 15,500 m2 shopping centre, with retailers such as Monoprix, H&M and Nature et Découverte. French developer Apsys intends – with the 18,000 m2 ‘Ruban Bleu’ shopping centre in Saint Nazaire – to create a link between the city centre and the harbour. The development of downtown shopping centres is welcomed by many branded retailers which otherwise would have not been able to move into the city due to lack of available and affordable retail space. Such shopping centres are particularly interesting for retail concepts in home equipment, beauty and fashion accessories. Zara Home made its first entry in France with a store in the shopping centre of Boulogne Billancourt, a smart district southwest of Paris. An increasing number of brands are keen to open their own stores such as Samsonite, Lee, and Nokia. However, rental rates remain stable averaging €636/m2/year in city centres, €100 to €200 in the periphery and €1,000 to €2,000 per m2 per year for prime locations in large agglomerates such as Bordeaux, Lyon, Lille, Marseille, Nice, Toulouse or Strasbourg. Paris is a league of its own (see sidebar) with annual rental values per m2 between €3,500 to €9,500.
Major future projects for 2009 include ‘Lyon Confluence’, a mixed leisure and retail project on 150 ha in Lyon. Developed by Unibail/Espace Expansion, Lyon Confluence comprises 15 medium-sized stores with a 3,375 m2 Monoprix, 60 boutiques and 15 restaurants. Also in Lyon (in Vaux-en-Velin, a district of Lyon) French developer Altarea is to open ‘Carré de Soie’. This 25 ha retail project will have eight medium-sized stores, some 50 boutiques and restaurants. Jardiland, Castorama, Go Sport and Maison de la Déco are among the retailers that have already signed in.
An active retail market in Paris
The retail property market in Paris was very active throughout 2006 although the sector is becoming increasingly difficult to grasp. This is due to the market being constantly reshuffled to reconcile retailers’ expansion strategies, investors’ expectations and changes in consumer behaviour. Demand continues to concentrate in highly prestigious locations and busy shopping streets. “Unfortunately for the big-name retailers, these prime sites are scarce,” states Louis Meyniel, manager of the Retail department at CBRE France. “Even sites that simply meet their ever-more demanding requirements are few and far between.” There is a definite trend for large food chains to move back to the heart of each Parisian arrondissement with smaller units (80 to 300m2). Group Monoprix plans to open some twenty Monop’ stores in 2007. The concept was inaugurated in early 2005 as a convenience store and there are currently ten such Monop’ stores in Paris. The 300 m2 Monop’ stores are open six days a week, from 9 a.m. to 12 p.m. and offer some 4,500 items. They are located in districts with a population density and heavy pedestrian passage. Auchan is testing a discount concept called Simply Market with the intention of turning some of its Atac supermarkets into Simply Market stores.
“The good health of the luxury market and the increase of the demand from foreign brands for flagships have been the key feature of the Parisian market,” says Christian Dubois, managing director of the Retail Department at Cushman & Wakefield France. The average rental value in Paris, as reported by the French property data source ‘Argus de l’Enseigne’ remained relatively stable at an average €1,085€/m2 as of November 2006 (€1060 a year earlier) but rental values for prime sites on the Champs Elysées (which attracts 120 million visitors per year) are heading toward the symbolic threshold of €10,000 per m2 annually, making it the most expensive street in France.
One threat on the otherwise positive picture is the ever-increasing interventionism of local authorities: H&M has been refused an authorisation to open a 3,430 m2 flagship store on the Champs Elysées by the Mayor of Paris.
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