Consumer Landscape:

Forecast growth for retail sales, though prolonged period of economic concern, resulting in consumers saving more

• While we expect lowering interest rates to support household spend, structural changes in the economy mean the savings rate is expected to have shifted to a permanently higher level since the pandemic.
• Although retail sales growth is slowing, growth rates forecast for this year and next are returning to rates seen prior to the pandemic as spending has stabilised.
• As a growing number of consumers engage with online retail, we expect brands to strategically utilise an omnichannel approach in order to create the most exposure to consumers. 

Retail Parks:

Value-orientated retail will continue to drive the growth of retail parks

• Easing inflationary pressure and growing consumer confidence will improve the fortunes of more traditional bulky goods and ‘big-ticket’ operators pertinent to out-of-town schemes, resulting in increased sales across retail parks.
• More established markets with a broader mix of operators, that include grocery-anchored schemes and a focus on value, will continue to see the strongest rental growth across Europe. 
• Convenience goods retailers continue to drive store acquisitions, increasing the downward pressure on vacancy and building competitive tension in markets with little room for development growth.

High Streets:

Prime retail demand will stay strong, with growth stabilising in 2025

• Demand for top-quality retail spaces is expected to remain strong, driven by constrained availability in prime locations.
• Rental growth and vacancy reduction are forecasted to slow in 2025, signalling a shift toward more normal market conditions.
• Southern Europe and mass-market streets in major cities like London and Paris are projected to continue outperforming.

Factory Outlets:

Outlet schemes increasingly used by brands to increase consumer exposure

• The integration of FOCs within mixed-use developments marks a significant shift towards bringing together a whole retail offering shopping experience for the consumer. 
• The growing emphasis on F&B options, pop-up stores, and the entry of new brands underscores the FOC’s evolution from mere discount outlets to destination retail locations.
• Looking ahead, the ability of FOCs to continue evolving in response to consumer preferences will be crucial in ensuring their relevance and success in the competitive retail landscape. 

Shopping Centres:

Polarisation in the sector is set to strengthen

• Good convenience-anchored neighbourhood schemes and prime regional supermalls are proving in favour with consumers and, therefore, will continue to see solid occupational demand, improved void rates and positive rental growth.
• Meanwhile, many smaller, older secondary or mid-market schemes that have lost identity, purpose, and a competitive edge will require significant investment in order to modernise, diversify and decarbonise.
• However, in all cases, diversification and value-add opportunities are gaining momentum, either to build resilience and remain in tune with consumer evolution, or as a more significant response to market saturation.

Investment & Yields:

Poised for steady growth, driven by interest rate cuts, improving investor confidence, attractive income returns, and stabilising yields

• The ECB is projected to reduce interest rates by 25 basis points at each meeting until March 2025, lowering rates from 3.50% to 2.50%, which should positively influence market sentiment across the eurozone.
• We expect steady turnover growth, underpinned by improving investor confidence in the retail sector and broader economic recovery.
• Income returns are likely to remain attractive in the near term, supported by improving occupational markets and a limited supply of new development projects, which should reassure investors.
• As more assets come to market and the buyer pool broadens, the main challenge will be achieving consensus on pricing, which remains a significant hurdle for deal-making.
• Prime yields, particularly for retail warehouse and high street assets, are gradually bottoming out, with slight yield compression expected in 2025, while shopping centre yields should stabilise in the first half of the year.

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