Destination Europe 2013

The 250 most renowned retailer brands and their presence across the key European cities

Foreword
Our 2009 report, Cross Border Retailing in Europe, explored the international expansion of retailers into country markets. This report examines, for the first time in detail, the expansion and presence of international retailers in the key, leading European retail cities. Using our unrivalled knowledge and insight into retail markets, in conjunction with our network of local offices, we have analysed the presence of the 250 leading international retailers across Europe. Our research covers 55 key European markets, as identified within our 2011 Retail City Profiles, and two new retail markets in Eastern Europe (Belgrade and Bratislava). International retailer road mapping is becoming increasingly focussed on cities, as cross border barriers fall and as retailers chase diversification and growth. Whilst retail is becoming increasingly international, at the same time, retailers are under growing pressure to improve profitability and margins, which often means rationalising portfolios and sifting out non-performing stores. Expansion remains firmly on the agenda however. Factoring in the continuing challenging economic conditions for retailers across Europe (with little sign of the headwinds abating), and the structural changes to the industry resulting from the rise of multi-channel retailing, it is clear that any expansion needs to be careful, considered, and selective. The relative attractiveness of cities to international retailers is based on a combination of numerous complex factors; market size, maturity of market, resilience and growth prospects, adjacencies and market familiarity, competition, real estate transparency and risk. This puts a premium on expert advice from professionals that live and breathe retail, and have access to the scale and breadth of data to enable them to provide accurate, holistic advice across Europe and beyond. Jones Lang LaSalles pan-European Retail team now consists of 1,000 dedicated retail staff, across 76 corporate offices in 31 countries. The goal of each is to provide a truly integrated service across the EMEA region, creating a competitive advantage for our clients, applied directly to their individual real estate decision-making needs, through the use of accurate data, market knowledge and forward-focused thinking. We hope this report proves to be useful and insightful, be you retailer, investor, developer or landlord. Whilst retail undoubtedly faces challenges, clear new opportunities are still emerging. James Dolphin James Brown Head of EMEA Head of EMEA Retail Retail Agency Consulting and Research
Westfield Stratford City

Jones Lang LaSalle Cross Border Retailer Index 2012

Source: Jones Lang LaSalle City Rank

1. Five Fast Facts

London has the highest presence of international retailers across Europe, followed by Paris, Moscow, Milan and Madrid. Italy, driven by luxury, is the largest exporter of retail fascias across the key retail cities in Europe, although the US is catching up fast. Zara, H&M and Mango have the greatest retailer coverage across Europe; Guess and Calzedonia are amongst the most expansive retailers. Paris commands the highest rents for international retailers, followed by Zurich and London; London tops the luxury rental table, followed by Paris and Moscow. London just edges out Paris at the top of the luxury retailer index, followed by the powerhouse Moscow, and Milan.

Rank City Index

Mainstream

Premium

Luxury

1 2 3 4 5 6 7 8 9 10

London Paris Moscow Milan Madrid Rome Munich St Petersburg Prague Barcelona

235 217 196 174 168 151 146 142 140 138

London Paris Moscow Milan Madrid Rome Munich St Petersburg Prague Barcelona Istanbul Berlin Hamburg Vienna Amsterdam Frankfurt Athens Antwerp Warsaw Lisbon Dsseldorf Brussels Zurich Kiev Stockholm Dublin Cologne Valencia Budapest Bucharest Zagreb Lyon Copenhagen Manchester Bilbao Marseille Turin Seville Glasgow Stuttgart Bordeaux Lille Liverpool Belgrade Oslo Birmingham Ankara Bratislava Luxembourg Leeds Helsinki Cardiff Belfast Gothenburg Nottingham Edinburgh Malm

1 2 3 4 5 6 7 8 9 10 11 12 13 14= 14= 16= 16= 18 19= 19= 19= 22 23= 23= 25 26= 26= 28 29 30 31 32= 32= 34 35 36 37= 37= 37= 40 41 42 43 44 45= 45= 45= 48 49= 49= 51 52 53 54 55 56 57 0 50 100 Index 150

Average

(Average representation = 100) 200 250

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2. Retailer Presence
London tops the international retailer league
London is the most attractive location for international retailers, based on the presence of the top 250 international retailers in the key European retail markets. The UKs capital is differentiated by its retail market size and maturity, as well as the high degree of market transparency, which together have resulted in a long history of success for international retailers. This year we have seen a number of new brands coming to London, from Rag and Bone and Victorias Secret from the US, to Bosideng from China. Major European cities are first ports of call for international retailers, and London, which is a particularly retail friendly market, leads for many as the springboard to Europe. Other European cities successfully attracting international retailers include the core established retail markets of Paris, Milan, Madrid, Rome and Munich. A pick-up in retailer expansion has also been observed recently in other regional cities in Germany and the Benelux countries. After entering core major markets, retailers are selectively expanding into regional cities, then into growth markets. Borders are becoming less of a barrier, and retailers are capitalising on new growth opportunities. We have also observed the burgeoning success of the emerging growth markets of Moscow, St Petersburg, Istanbul, Prague, Warsaw and Kiev. With a patchy and subdued growth outlook for some Western and Southern European markets, Eastern Europe provides some attractive expansion opportunities for retailers with established and successful retail businesses. Further down the rankings, there are still plenty of strong retail markets across Europe, in particular some of the larger UK regional cities and the Scandinavian markets, which despite market opportunity remain relatively untapped from an international retailer perspective. The trend towards increased penetration of international brands across Europe will accelerate over the coming years, as expansion strategies for many retailers focus on top tier cities. Retailers with a strong and translatable proposition should explore international expansion, whilst appreciating and mitigating the risks. For now, however, London remains number one, Paris is in second place, but Moscow in particular, is catching up fast.

Jason Hawkes

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Europes Core and Growth Retail Markets

Source: Jones Lang LaSalle (Circle size is proportional to Cross Border Retailer Index)

Market core growth

Demand strong steady flat

Core Retail Markets

The mature, established retail markets are generally the first port of call for retailers seeking international expansion. The map opposite shows the core retail markets (together with the growth markets, discussed later) across Western Europe, with the greatest international retailer appeal. The number in each circle represents the cross border retailer index ranking for each city, and the arrow represents current occupier demand. As we can see, demand for the right space in the right place remains resilient to cyclical headwinds. The following pages contain a brief description of each of the core retail markets of London, Paris, Milan, Madrid, Rome and Munich.
London

St. Petersburg

Moscow

1 19= 9
Paris Prague Warsaw

23=

Kiev

2
Milan

Munich

Madrid

Rome

11

Istanbul

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London
RANK 1

Paris

RANK 2

Westfield Stratford City

London ranks as the most attractive location for international retailers in Europe. It attracts international brands for a number of reasons, including: size, maturity and transparency of the retail market, in addition to the track record of retailers who have successfully opened here. The four main shopping areas, Oxford Street, Regent Street, Bond Street and Covent Garden, collectively form the largest concentration of retail in Europe. The opening of the two Westfield shopping centres has also been the catalyst for a number of new entrants into the London market, which continues to dominate the UK retail market, driven in part by tourist spend. London is a retail friendly market and will continue to act as an entry point to Europe for international brands. This year we have seen a number of new brands coming to London, from Rag and Bone and Victorias Secret from the US, to Bosideng from China.

Paris is the second most attractive location for international retailers in Europe. Paris is one of the worlds leading tourist destinations and, along with London, one of the strongest global retail locations. It continues to attract the biggest international and national brands that inevitably look to the city to open flagship stores, in particular the premium and luxury brands. Both shopping centres and high streets are attractive to the city shoppers, with centrally-located Parisians preferring areas such as the ChampsElyses, Opra and Boulevard Haussmann, while those living on the periphery tend to migrate to suburban shopping centres Rosny 2 or Velizy 2. The Champs-lyses, the most expensive retail location in France, has recently welcomed such new tenants as Abercrombie & Fitch, Marks & Spencer, and Banana Republic. Other recent new entrants include Calzedonia, Forever 21, Aldo and Intimissimi.

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Rome
RANK 6

Milan
RANK 4 Milan is the fourth most attractive location for international retailers in Europe, and is the industrial, commercial and financial capital of Italy, with an economy dominated by the service sector. Milan is also one of the worlds most famous fashion centres, and is a particularly strong premium and luxury retailer market. The city centre boasts a large retail floor space, although there are no shopping centres in the central areas of the city. The city centre comprises two distinct but very affluent shopping areas; the first, with a very upmarket emphasis, is located around Via Montenapoleone, the second is the more mainstream area around the Piazza del Duomo, including Vittorio Emanuele II. Recent entrants to the market include Cos, Agent Provocateur and Just Cavalli.

Rome is the sixth most attractive location for international retailers in Europe. The Italian capital attracts millions of tourists every year, and the retail market has been dynamic in recent years. Several large out-of-town shopping centres have opened recently, but the high street has maintained its pre-eminence for both local and international shoppers. The areas around Piazza di Spagna and Piazza del Popolo in the old town are traditionally the most sought after. Via Condotti and Via del Babuino are also considered prime locations. In terms of shopping centres, Porta di Roma (North Rome) and Roma Est (East) remain the best performing schemes and each feature some important flagship stores. Recent international retailer market entrants include Superdry and Deichmann.

Madrid
RANK 5 Madrid ranks as the fifth most attractive location for international retailers in Europe. Being the capital and largest city in Spain, Madrid draws upon a large consumer base, which is among the most affluent in the country. It is also a transport hub, and as such a magnet for tourist and business travellers. The Madrid retail market appeals to a wide audience and many of the top fashion brands have their flagship stores here. Preciados is the prime high street, and the most famous retail location in Spain. The main city centre shopping centres are La Vaguada and Parquesur. The stretch of Ortega y Gasset between Serrano and Velazquez Street is the prime area for luxury brands. Recent international retailer market entrants include Tiger of Sweden, Hollister, Apple and Agent Provocateur.

Munich
RANK 7 Munich ranks as the seventh most attractive location for international retailers in Europe. The Bavarian state capital is the top retail location in Germany, and retailers are queuing up for units in good positions. Retail spend per capita in Munich is among the highest in Europe, and a strong tourist market also helps to buoy the local economy. Kaufingerstrasse, Neuhauser Strasse and the area around Marienplatz are the prime high street locations, with the best performing centrally-located scheme being Fnf Hfe. Maximilianstrasse is the home to most luxury retailers in the city. Recent international retailer market entrants include Tory Burch and Woolrich.

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Cross Border Retailer Index Rank vs. Retail Sales Growth Forecast
Source: Jones Lang LaSalle, Oxford Economics (Belgrade data unavailable)

Milan

London Paris Moscow

Madrid Rome

Power Retail Growth Markets

With current headwinds across most European markets, opportunities for expansion into territories with stronger growth prospects are becoming increasingly attractive. Once established in multiple markets, retailers can benefit from reduced risk associated with being reliant on one or fewer geographies. In some instances, expansion is about reducing the risk of over-reliance on a dominant domestic market, for others it is about growth. Whilst the Far East is clearly a key growth market, attractive opportunities for international expansion exist closer to home, in Central and Eastern Europe in particular. Central and Eastern Europes growing importance as a global retail market is demonstrated by the fact that it now has more cities in the top 30 retail locations than Southern Europe. Current hotspot retail markets in Central and Eastern Europe are the growth markets of Russia (Moscow and St Petersburg) and Turkey (Istanbul), in addition to the capital cities of the Central European powerhouse economies (Prague and Warsaw) and the emerging retail market in Kiev. These markets, as shown opposite, are already successfully attracting significant numbers of international retailers, either through franchise or company-owned stores. They still have scope for further expansion, however, due to the market size, and/or positive retail sales outlook. The size of bubble in the graph opposite (and throughout the report) represents the size of the country retail market. As such, it provides an indication of the wider market opportunity presented by entry into each individual country market.
Bilbao

Munich Prague Berlin Vienna Amsterdam Frankfurt Antwerp Istanbul Hamburg

St Petersburg

Barcelona

Athens

Dsseldorf

Lisbon Brussels Zurich

Warsaw Kiev Stockholm

Dublin Valencia Zagreb

Cologne

Budapest Lyon Copenhagen Marseille

Bucharest

Manchester Glasgow

Seville Stuttgart

Turin Bordeaux

Lille
Key: Country Level Retail Sales (2011)

Liverpool Birmingham Bratislava

Cross Border Retailer Index Ranking

Oslo Ankara Helsinki Luxembourg Cardiff Belfast Nottingham 0 10 Gothenburg Edinburgh Malm 20 30

Leeds

Under 50bn

50bn 100bn

100bn 200bn

200bn 300bn

300bn 400bn

Over 400bn

Key: growth markets

Retail Sales Growth Forecast (5 yr %) | 14 | Jones Lang LaSalle

-20

-10

Moscow
RANK 3

Prague
RANK 9 Moscow ranks as the third most attractive location for international retailers in Europe. Russia is predicted to become Europes leading retail market, with disposable incomes increasing rapidly and a burgeoning middle class. Moscows high overall ranking in our Index is due mainly to the high penetration of mass retailers in the city. There are over 80 shopping centres in the Moscow region (with a further estimated 320,000 sq m in the pipeline), in addition to some prominent areas of high street retail. Tretyakovsky Proezd is the main luxury street, whilst the GUM and TSUM areas, in addition to Petrovka and Stoleshnikov Lane, also host luxury brands. The main streets for local and international mass market brands are Tverskaya, Novy and Stary Arbat. Recent entrants into the market include; American Eagle, Victorias Secret, American Apparel, Ben Sherman, Koton, La Senza, Mac Cosmetics, Marlboro Classics, Okaidi and Warehouse. Prague ranks as the ninth most attractive location for international retailers in Europe. The Czech Republic capitals retail market is dominated by shopping centres. Nov Smchov shopping centre is located on one of the busiest transport hubs in Prague, helping make it the best performing centre in the city. The prime high street locations are concentrated in two places; the area around Na Pkop provides the mass retail offer, and includes four shopping galleries. Pask Street is home to luxury brands such as Louis Vuitton and Herms, and offers a smaller number of shops in a more intimate atmosphere. Recent entrants into the market include Carpisa, Aldo, T.M. Lewin, Desigual, Tiffany & Co, Jimmy Choo and Parfois.

Istanbul
RANK 11 Istanbul is the eleventh most attractive location for international retailers in Europe. Turkey is the seventh largest organised retail market in Europe, with a total leasable area of 8.3 million sq m across 332 shopping centres. Approximately 2.6 million sq m of leasable space is currently under construction, with Istanbul accounting for almost half of this total. The huge market of approximately 13.3 million consumers in Istanbul is viewed by many retailers as the perfect gateway to the Middle East and Caucasus region. Istanbuls retail market is revolutionising itself at great speed, with significant quantities of modern shopping centre stock coming online. The importance of shopping centres in the market is growing, with the likes of Forum Istanbul and Istinye Park trading particularly well. This will be further fuelled by the huge development pipeline, and in particular the imminent opening of several landmark schemes, including the Zorlu Center and Emaars Boulevardi. Istanbuls retail culture is still mostly dominated by the high street, however, with Istiklal Street the dominant mass market location on the European side, along with Niantai district, which caters for luxury brands. On the Asian side, Bagdat Street is the most well-known and popular area, featuring a range of local and international brands. Recent entrants into the market include Aeropostale, Carluccios, Zadig&Voltaire, Promod and Gymboree.
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St Petersburg
RANK 8 St Petersburg is the eighth most attractive location for international retailers in Europe. St Petersburg is the second largest city in Russia, and a major financial and industrial centre. Consumer spend is divided between out-of-town regional shopping centres and the city centre, which is skewed towards mass-market and premium brands. Nevskiy Prospect is the historic centre of the city and the most popular street, providing a large variety of mass market shops. Premium brands are found mainly in multi-brand chain stores. 2010 brought long-awaited large new schemes to the market, Galeria and Nevskiy Centre, and there is a further estimated 425,000 sq m in the pipeline. Recent entrants into the market include Chanel, Guess, Mac Cosmetics, Marlboro Classics, Sephora and Trussardi Jeans.
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Warsaw
RANK 19=

Warsaw ranks as the equal nineteenth most attractive location for international retailers in Europe. The retail landscape in the Polish capital is dominated by shopping centres, a reflection of the shopping patterns of Polish consumers, who prefer covered schemes to exposed streets. Nevertheless, high street locations are gradually gaining in importance and capturing retailers interest. The prime high street locations are concentrated in Marszakowska Street, along with the renovated Wars and Sawa Junior department stores. This area is the most sought-after pitch for popular mass market brands. Warsaws shopping centres continue to perform strongly, in particular the Zlote Tarasy scheme. Recent entrants into the market include Gap, Cos, American Eagle, Victorias Secret, Bath & Bodyworks, Carpisa and Marco Polo.

Other Hotspot Retail Markets

In addition to the fast-moving growth markets, there are a number of more established retail markets that have attracted retailers in the last 12 months, and which benefit from a relatively strong retail sales growth outlook. In particular, the Benelux cities (Brussels, Amsterdam, Antwerp), have seen some of the strongest international retailer interest in the last 12 months. And the regional German cities of Frankfurt and Dsseldorf, together with Vienna, are all established, affluent markets which have been successful in attracting international retailers from the first-stop core cities, on the next phase of their expansion. Further down the rankings, there are numerous retail markets that are relatively untapped from an international retailer perspective, but which are forecast to benefit from above average retail sales growth. Whilst relatively small in terms of overall market size, the affluent Scandinavian markets of Malm, Gothenburg and Helsinki, in addition to some of the larger UK regional cities of Edinburgh, Nottingham, Belfast and Cardiff, should be on the radar of expansive international retailers going forward.

Kiev

RANK 23=

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The Ukrainian capital is the equal twenty-third most attractive location for international retailers in Europe. After a long period of uncertainty resulting from the financial crisis and political instability, Kievs retail market activity has picked up markedly. The recent European Football Championships stimulated significant infrastructure and commercial real estate development, but Kiev still lags behind most European capitals in terms of quality of shopping centre stock and provision per capita. The main shopping streets in Kiev include Kreschatik, Krasnoarmeyskaya and Sagaidachnogo home to the international brands. Upmarket brands traditionally prefer the prestigious area around Passage and Gorodetskogo. There are several shopping centres in the city centre with quality tenant-mixes, including Globus and Mandarin Plaza. The reconstructed TSUM is expected to be opened on Kreschatik St in 2015. Recent entrants into the market include Diesel, Oviesse, Valentino, Prada, Dolce & Gabbana, Mac Cosmetics and Trussardi Jeans.

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Cross Border Retailer Index vs. International Prime Rent

Source: Jones Lang LaSalle

Cross Border Retailer Index

240

London

3. Rental Analysis
Retailer appetite for the best space across Europe remains strong. Many top-tier retailers will accept flagship space (often in the form of brand pavilions, which are effectively showroom style stores that showcase the brand) in iconic locations, and nothing less. This is maintaining or, in some instances, putting upward pressure on rents in super-prime locations, while more secondary locations are seeing higher vacancies and reduced demand for space. Looking at the rental levels commanded by international retailers (luxury rents are explored later in the report), there is a clear correlation between the number of international retailers present in a market, and the prime rents paid by international retailers, as demonstrated opposite.

220

Paris

200 Moscow

180 Milan Madrid 160 St Petersburg 140 Prague Istanbul Barcelona Berlin Hamburg Athens 120 Lisbon Warsaw Amsterdam Antwerp Brussels Kiev Frankfurt Dsseldorf Zurich Cologne Rome Munich

Key: Country Level Retail Sales (2011)

100

Stockholm Budapest

Dublin

80
Under 50bn 50bn 100bn 100bn 200bn 200bn 300bn 300bn 400bn Over 400bn

Amsterdam Valencia Copenhagen Zagreb Lyon Bucharest Manchester Turin Stuttgart Glasgow / Bordeaux / Lille / Marseille Leeds Belgrade Oslo Luxembourg Helsinki Cardiff Edinburgh 1000 2000 3000 4000 5000 6000
International Prime Rent (/sq m/year)

Bilbao

Liverpool Seville

60

Ankara Birmingham Bratislava Befast Gothenburg

Nottingham 40 Malm
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7000

8000

Paris commands top international retailer rents

Paris, Zurich and London clearly command the highest international retailer rents for prime, mainstream retail space, on the Avenue des Champs-lyses, Bahnhofstrae and Oxford Street respectively. The core cities of Munich and Milan, as well as the growth powerhouse market of Moscow, are also commanding high rents, and lead the following pack. The graph on the previous page also clearly identifies the regional clusters, whereby UK regional, Scandinavian, French regional, German, Benelux, Eastern European and Southern European cities are generally grouped together. Whilst not surprising, this illustrates that there are useful reference points and commonalities between cities in the same country or region. The maturity of the retail market clearly influences prime rental levels. The growth markets of Istanbul, St Petersburg, Warsaw, Prague and Kiev are all commanding relatively low rental levels, relative to their international retailer presence. These markets are also forecast to benefit from some of the strongest medium-term retail sales growth in Europe. Clearly as these markets mature, retail sales grow, and the number of international retailers present increases, rents are likely to rise further.

Retail Sales Growth Forecast vs. International Prime Rent

Source: Jones Lang LaSalle, Oxford Economics (Belgrade data unavailable)

25

St Petersburg 20 Ankara Bucharest Warsaw Stockholm Malm Nottingham Gothenburg 10 Luxembourg Birmingham Belfast Leeds 5 Bratislava Marseille Copenhagen Bordeaux Antwerp Lisbon Brussels Helsinki Budapest Edinburgh Oslo Manchester Istanbul Glasgow Lille Cologne Amsterdam Vienna Frankfurt Stuttgart Berlin Dsseldorf Rome Madrid Barcelona Milan Munich Kiev Moscow

15

Hamburg London Paris

Prague Cardiff

Zurich

Lyon

Zagreb 0

-5

Turin Valencia Dublin Seville

-10
Retail Sales Growth Forecast (5 yr %)

Liverpool Athens

-15

Key: core markets growth markets

International Prime Rent (/sq m/year)

Bilbao

-20
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1000

2000

3000

4000

5000

6000

7000

8000

4. Retailer Country of Origin

Italy tops the retailer exporter league

Looking at the country of origin of international retailers, as we can see in the map overleaf, Italy is the number one exporter of retail fascias, accounting for 17% of total international retailer presence in the 57 European markets covered. Benetton and Diesel are the highest placed Italian retailers, with strong coverage across the 57 markets. However, it is the strength of the Italian Luxury retailers which accounts for Italys position at the top of the rankings. Max Mara is the most prolific luxury retailer in our analysis, with presence in 75% of the markets covered. Italys supremacy, however, is under threat from across the Atlantic. The US is currently in second place, accounting for 16% of total international retailer presence, but is rising rapidly as American retailers continue to selectively expand across Europe. Long established operators such as Starbucks continue their expansion and a variety of newer entrants to the market, including most recently, Victorias Secret are exploring new markets. The UK ranks third, accounting for 13% of all international retailer presence. Whilst London is the largest importer of international brands, the UK is also successfully exporting brands globally. Retailers such as The Body Shop, Lush, Burberry, Marks & Spencer, Debenhams, Primark, Superdry, and Topshop are actively, albeit selectively, expanding into new territories. The top three exporter countries are followed closely by Germany, also accounting for 13% of the market, driven by its strength in mass market retailing, France with 12%, driven by Luxury, in particular through the large holding companies of Pinault-Printemps-Redoute (PPR) and LVMH, and Spain with 10%, driven mainly by the reach and coverage of Mango and the Inditex brands. We have also analysed the main countries targeted by the top six exporter countries. Not surprisingly, it is generally a question of neighbouring, familiar markets being the favoured target countries. The Italian brands have strong presence in the German and Spanish cities, for instance, the US brands initially favour the UK market, and London specifically, as their springboard into Europe. UK retailers have a strong presence in Germany and increasingly in Russia, whilst French retailers target the neighbouring German cities, and Spanish retailers are heavily represented in French cities.

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Retailer Country of Origin

Source: Jones Lang LaSalle

UK

3rd
GERMANY

Retailer Rank The Body Shop 3rd = Lush 6th Burberry 31st = Karen Millen 37th = Marks & Spencer 64th =

4th

Retailer Rank Adidas 16th = Hugo Boss 19th = New Yorker 24th = Deichmann 27th = Puma 27th =

USA

2nd
FRANCE

Retailer Rank Timberland 7th = Tommy Hilfiger 7th = Foot Locker 9th = Claires 16th = Starbucks 19th =

5th

Retailer Rank Louis Vuitton 19th = Petit Bateau 37th = Escada 37th = Cartier 47th = Herms 53th = ITALY

1st

Key: Rank Retailer Coverage Ranking (1-250)

SPAIN

6th

Retailer Rank Benetton 3rd = Diesel 11th = Max Mara 13th = Geox 16th = Emporio Armani 37th =

Retailer Rank Zara 1st Mango 3rd = Massimo Dutti 11th = Bershka 31st = Desigual 31st =

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Top 20 Retailers
% Coverage of Europes Key Markets Source: Jones Lang LaSalle City Rank Zara H&M The Body Shop Benetton Mango Lush Tommy Hilfiger Timberland Foot Locker G-Star Diesel Massimo Dutti Max Mara Jack Jones Gant Geox Claires Adidas Starbucks Louis Vuitton Hugo Boss 1 2 3= 3= 3= 6 7= 7= 9 10 11= 11= 13= 13= 13= 16= 16= 16= 19= 19= 19=

5. Extensive and Expansive Retailers

Zara tops the coverage league
Zara is the only retailer with 100% coverage across all the key European markets reviewed, and therefore tops the retailer coverage league. Zaras Spanish owner Inditex group also owns the Massimo Dutti premium clothing brand, which ranks equal 11th in the retailer coverage list. In total, the Inditex Group operates 5,693 stores across the world, and opened 166 stores in the first six months of 2012 alone. Swedish retailer, H&M, is second on the list, with presence in 96% of markets covered. Despite its first international expansion taking place nearly 50 years ago, pan-European coverage has only really materialised in the last five to ten years. With plans to open stores in Mexico, Malaysia and Kuwait over the next eighteen months, H&M clearly has its sights on global coverage. Rival UK cosmetics retailers, The Body Shop (equal 3rd) and Lush (6th), are closely matched in terms of coverage of the key European markets. Both use a franchise model, which provides retailers with a quick and low risk means of increasing coverage. In addition, the need for small retail units, combined with relatively affordable products, allows both retailers to export their brand successfully with relative ease across many markets. Not surprisingly, Starbucks is the only Food and Beverage retailer to make the Top 20 of the coverage table (equal 19th). Further expansion looks likely, as plans to open 300 new stores across the EMEA region in the next five years have been widely reported. The Top 20 is dominated by retailers we define as mainstream, accounting for 12 out of the Top 20 retailers by total coverage. There are six premium retailers within the Top 20, with US retailers Tommy Hilfiger and Timberland ranking highest (equal 7th), both with over 80% coverage of Europes key markets. Italys Max Mara (equal 13th) and Frances Louis Vuitton (equal 19th) are the only Luxury brands to make it into the Top 20.

60

65

70

75

80

85

90

95

100 Luxury

Mainstream

Premium

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Significant expansion opportunities remain

Perhaps surprisingly, only nine retailers have more than 80% coverage across Europes key markets. For the majority of international retailers, therefore, significant expansion opportunities remain. In fact, over 100 retailers have presence in less than 20% of markets covered. For these retailers, over 80% of the key markets analysed across Europe remain untapped. Amongst those retailers which are currently in expansive mode are North American retailers, Guess, Forever 21, Apple, Starbucks and Mac Cosmetics, in addition to European players Michael Kors and Calzedonia. One of the largest tests for international retailers looking to grow in Europes key markets, is the risk that the brand or product does not translate across borders. Unfortunately, there are numerous examples of retailers that have endeavoured to break into a new market later to withdraw. Market testing is crucial, and one of the principal advantages of e-commerce is the ability to build brand awareness overseas prior to arrival, of which there are many examples. E-commerce, and social media in particular are facilitating and accelerating the internationalisation of fashion trends in particular. Previously retailers could not transfer products as easily, as they were historically designed for targeting domestic markets. This generally left the retailer with the choice to either accept lower sales densities in overseas markets or to design and source separate ranges. There are now more than 1 billion consumers using Facebook each month around the world. Consumers everywhere, therefore, are increasingly exposed to the same fashion and cultural influences. The second major challenge lies in understanding market differences. The complexities of local market fundamentals exist across all retail markets, irrespective of geography. In this context, local expertise or partnering is paramount in order to try and avoid the pitfalls, in terms of legislation, site selection and lease terms.

6. Luxury

although challenges to overcome

There is a great temptation to access the huge pool of potential new customers in foreign markets, in particular for retailers that perhaps are not seeing any growth or even struggling in their domestic markets. Expansion for these reasons very rarely works, and it is important to have a strong, well-run business, before dedicating the extensive time and resources needed for expansion.

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The rise and rise of luxury

The global luxury market has remained relatively sheltered from the economic crisis. Despite a short period of slower sales in 2009, the market bounced back in 2010 and continued to flourish throughout 2011 and into 2012. Whilst economic uncertainty has deterred most global middle-income shoppers, affluent Western shoppers have flocked back to the luxury brands, which together with economic growth in the BRIC nations and an insatiable appetite for luxury goods in the Far East, has driven growth in the luxury goods market globally. According to retail expert Verdict, the global luxury goods market witnessed strong growth to 2010, and is currently valued at 320bn. Verdicts recent forecasts suggest that this expansionary trend is set to continue, with estimates valuing the market at around 390bn by 2015. Europe remains the largest luxury goods market, with over 90bn being spent on luxury branded products in 2010. However, Asia Pacific is the only market not to have suffered a drop in luxury sales in 2009, and is set to experience unprecedented growth over the next five years, rapidly closing in on Europes number one position. By 2015, Asia Pacifics luxury goods market is expected to be valued at 112bn, up 92% on todays valuation. The growing wealth creation in the Asia Pacific region, most notably throughout China, and the sheer volume and size of its densely populated cities, has made it a very attractive destination for luxury retailers. The Global Luxury Houses have emerged from the financial crisis much faster and stronger than most businesses. Burberry, Gucci Group, Herms, LVMH, Polo Ralph Lauren and Richemont have all revealed strong sales growth, with some recording record sales in the last year. Expanding store networks have driven growth, particularly across the Asia Pacific region, where retail operations typically outperform the rest of the business elsewhere in the world. But despite this rapidly expanding region, Europe remains a core, mature and key market for the international luxury retail brands.

Cross Border Luxury Retailer Index 2012

Source: Jones Lang LaSalle City Rank London Paris Moscow Milan Madrid Rome Munich Istanbul Barcelona Zurich St Petersburg Kiev Hamburg Prague Athens Frankfurt Berlin Vienna Brussels Dsseldorf Amsterdam Lisbon Warsaw Antwerp Valencia Budapest Copenhagen Stockholm Bucharest Cologne Turin Bilbao Bordeaux Lyon Seville Lille Stuttgart Zagreb Luxembourg Manchester Marseille Oslo Belgrade Dublin Helsinki Ankara Birmingham Edinburgh Glasgow Leeds Liverpool Nottingham Belfast Bratislava Cardiff Gothenburg Malm 1 2 3 4 5 6 7 8 9= 9= 11 12 13= 13= 15= 15= 17= 17= 19= 19= 21 22 23 24= 24= 26= 26= 26= 29 30 31 32= 32= 32= 32= 36= 36= 36= 39= 39= 39= 39= 43= 43= 43= 46= 46= 46= 46= 50= 50= 50= 53= 53= 53= 56= 56=

(Average representation = 100)

0 50 100 Index
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150

200

250

300

350

400

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Cross Border Luxury Retailer Index vs Prime Rent (Luxury District)

Source: Jones Lang LaSalle

400
Cross Border Luxury Retailer Index

Paris London

350

London pips Paris to the post

In 2011, we published a report, Glitter & glamour shining brightly, which analysed the 100 most renowned luxury brands, and their presence in Europes top retail centres. As part of this research, we have revisited this work, expanding the number of markets covered in the analysis to the 57 key retail markets covered in this report. In our 2012 report, London leads the rankings in terms of luxury brand presence, marginally ahead of Paris, befitting their status as the two most renowned retail locations in Europe. The growth market of Moscow lies in third position, as in the overall index, followed by Milan, Madrid, Rome and Munich. These markets represent the mature luxury retail markets across Europe, each with a critical mass of international luxury retailers which attract both domestic and international consumers seeking high-end shopping experiences.

Moscow 300 Milan Madrid 250 Munich Istanbul St Petersburg Barcelona Kiev 150 Athens Prague Hamburg Frankfurt Berlin Rome

Zurich

Vienna

Lisbon

Brussels Amsterdam

Dsseldorf

100 Valencia Budapest 50 Warsaw Cologne Antwerp Stockholm Copenhagen Turin Lyon

Bucharest Bordeaux Seville Bilbao Zagreb Lyon Helsinki Ankara Belgrade Belfast Bratislava 0 Malm Gothenburg 1000

Stuttgart Marseille Lille Luxembourg Oslo Dublin Nottingham Liverpool Glasgow Edinburgh Cardiff Leeds 2000 3000 4000 5000

Prime Rent Luxury Districts (/sq m/year)

6000

7000

8000

9000

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Emerging Luxury Markets

Growth Luxury Markets

200

Established Luxury Markets

New Bond Street: from prime to ber-prime

We have also analysed rents commanded by luxury retailers across the 57 markets covered. New Bond Street in London tops the rental league, with headline rents of over 8,300 per sq m per year, following recent growth this year due to pent up demand for space finally being realised. Avenue Montaigne in Paris lies in second place, commanding rents of 7,500 per sq m per year. Despite the relatively small market size in terms of international retailer presence, Bahnhofstrae in Zurich commands the third highest rents in Europe, at just over 7,000 per sq m per year. This is followed by the Italian luxury shopping locations of Via Condotti in Rome and Via Montenapoleone in Milan, both at 6,700 per sq m per year and Stoleshinkov Lane in Moscow, commanding 6,000 per sq m per year. There is a clear gap between the rental levels in the top six luxury retail locations, and the rest, which are led by Vienna and the German cities. On this basis, Madrid (and to a slightly lesser extent Barcelona) and the growth markets of Istanbul and St Petersburg, all with established luxury retail markets, currently appear to provide luxury retailers with relatively good value for money. Top 20 Luxury Retailers
% Coverage of Europes Key Markets Source: Jones Lang LaSalle City Rank Max Mara Louis Vuitton Burberry Mont Blanc Emporio Armani Cartier Herms Gucci Bally Ermenegildo Giorgio Armani Bulgari Salvatore Longchamp Chopard Chanel Prada Bottega Veneta Tiffany & Co Tods 1 2 3 4= 4= 6 7= 7= 9 10 11 12 13 14 15= 15= 17= 17= 19= 19= 30 40 50 60 70 80

Max Mara is the most prevalent luxury retailer

Italian luxury brand, Max Mara, has the highest presence amongst luxury retailers, with 75% coverage of all markets. Louis Vuitton is the only other luxury retailer with over 70% coverage. Other luxury retailers with over 50% coverage are; Burberry, Mont Blanc, Emporio Armani, Cartier, Herms and Gucci. Expansive luxury retailers include Tory Burch, Bottega Veneta and Mulberry.

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7. Conclusion
Looking ahead, the numerous challenges facing retailers operating internationally will persist. As will the ever changing competitive environment that forces retailers to consider shorter-term, domestic opportunities with longer-term opportunities in developing markets. The top retailers in the next decade are likely to be those that focus on a portfolio of markets, with different levels of risk (core and growth), at different levels of maturity and with distinct consumer profiles. There are undoubtedly significant expansion opportunities for retailers across Europes key city markets. The key is for retailers to fully understand and maximise current store portfolios, before assessing the detailed risks and benefits associated with international expansion. And above all, to partner with knowledge and experience to achieve strategic, profitable and long-lasting growth. What is becoming increasingly clear, is that borders are becoming irrelevant, and the internationalisation of retail is gaining unstoppable momentum.

Methodology
The analysis looks at the presence of brands in the specific cities, as well as retailers which are opening imminently, focusing solely on retailers own shop networks, including franchises. Retailer concessions are excluded as are second-line brands, multi-label stores and branded shops within department stores, due to the lack of transparency. Geographically the study looks at the downtown area of each individual city, concentrating on its well-known shopping areas, supplemented by surrounding areas and out of town malls in prime locations. Prime rents represent the top open-market rent that could be expected to be paid by international and/ or luxury retailers for a notional unit of the highest quality and specification, in the most prime location in a market.

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Contact
James Dolphin Head of EMEA Retail Agency +44 (0)7921 944 355 james.dolphin@eu.jll.com James Brown Head of EMEA Retail Research & Consulting +44 (0)7860 408 863 james.brown@eu.jll.com Colin Burnet Associate Director, EMEA Retail Research & Consulting +44 (0)203 147 1185 colin.burnet@eu.jll.com

www.joneslanglasalle.eu

Copyright (c) Jones Lang LaSalle IP, INC 2012 No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.