Source: Savills Research; Mastercard Destination Index.
The data model created based on the metrics detailed above, identified London as the most attractive investment market despite it being one of the most expensive cities to buy into, due to the size of its retail market and its relatively attractive occupier terms for investors/landlords (15-year upward only rent review leases being the norm in prime locations).
Amongst European markets, Paris also featured highly as an attractive retail investment market, albeit was out ranked by Munich. This was due in part to some unique features of the French legal system such as ‘Loi Pinel’ (‘Loi Pinel’ grants tenants security of tenure providing them with the entitlement to either renew their lease at the end of the term or to receive compensation if the landlord refuses to renew).
While Munich is a much smaller retail market than London and Paris, its relatively affluent domestic population, attractive occupier terms from an investor perspective and its relative pricing (prime yields are 60 basis points higher than London and Paris), enhances its potential investor appeal. Similar factors placed Madrid and Barcelona in the top five in terms of investor attractiveness, although recent political uncertainty in the wake of the Catalan independence movement may temper investor confidence in Barcelona over the short term.