Europe's landlords to see rents drop as online retail thrives - AXA
February 19, 2013 2:28 AM EST
European shop landlords will have to accept lower rents in coming years to help besieged retailers cope with the rise of online shopping and weak consumer spending, French insurer AXA's property arm said on Monday.
Property owners in Spain are under most pressure, AXA Real Estate, Europe's largest real estate fund manager, said in a report called "Retail will never be the same again".
It said online shopping in countries such as France and Britain has become a "substantive threat" to store profitability, which could leave some retailers unable to afford rents that landlords would then have to reduce.
Property investors had underestimated the impact of internet shopping and the economic downturn left them "unable to differentiate between the weakening of physical sales due to the shift online from those resulting from the current recessionary environment", the report said.
"Ninety percent of future growth in retail sales in the UK, France and Germany from 2012-2016, or 91.5 billion euros ($122.2 billion) of the 101.2 billion euros total, will be captured by online spend," said AXA, which manages 43 billion euros ($57.41 billion) of property assets.
Spain is likely to see sales per unit area fall by 5.7 percent by 2016, ahead of France, Italy and Germany at 5.5, 4.4 and 3.2 percent respectively, said AXA, using a calculation comparing the change in physical stores sales to the change in retail floor space.
Such declines would spur retailers to slash property costs to remain profitable, forcing rents to fall. Occupancy costs in Spain, for example could decline by as much as 18 percent over the period, while costs in France could drop by 17 percent.
"Retailers will be forced to reduce occupancy costs ... For some retail units where profits are, in an economic sense, exceptional, rents will be maintained, but for others, affordable rents could drop close to zero," AXA said.
That means it would be unviable for retailers to operate from such units unless they were not charged rent.
Property investors should target larger malls with leisure and entertainment facilities with a lower reliance on retail, as well as luxury stores and discount stores that have fared better during the downturn, the report said. French stores were a danger due to the fact that a large supply of new retail developments was compounding the online problem.
About 43 percent of European Union citizens shop online, the European Commission said in February last year, up from 26 percent seven years ago. AXA said improvements in technology and a weak economy were driving more people online to find bargains.
The impact of online shopping on physical store sales has been most pronounced in Britain, where retailers such as HMV and DVD rental firm Blockbuster have gone into administration in the face of competition from online-only retailers such as Amazon.
Swathes of shops on Britain's high streets already stand vacant as retailers shut in less profitable towns. Agents are predicting a surge of demand for run-down warehouses on the edge of cities across Europe from retailers looking to improve their online delivery services.
British landlords such as Intu Properties, formerly Capital Shopping Centres, and Land Securities are fighting back against online retail by adding more restaurants and cinemas to their shopping centres to attract visitors as well as forging tie-ups with Internet firms.
(Reporting by Brenda Goh, additional reporting by Tom Bill; Editing by Mark Heinrich)
Most Popular Slideshows
- Prince William & Kate Middleton Caught Flirting In A Countryside Dinner Date [PHOTOS]
- Kate Middleton’s Mom Accused Of Being A Social Climber, Prince George Not Seen By Relatives
- Angelina Jolie & Brad Pitt’s Top Secret Wedding Tramps Jennifer Aniston’s ‘Friends’ Reunion & Pregnancy Talks [PHOTOS]
- 2014 US Open: Hottest Male Tennis Players To Watch [PHOTOS]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Pricey iPhone 6 on Release Date Likely but with 3X Retina Resolution & Mobile Payment Service – Reports
- 5.5-Inch iPhone 6 is iPhone Air on Sept 19 Release Date: 5 Things to Consider Before Buying
- Google Nexus 8 Confirmed as HTC T1 aka Volantis/Flounder with Freshly-Leaked Specs & Features – Reports
- Nexus 6 Release Date Update: Moto X+1 Look Leaked, Nexus X or Shamu Moved to Demo Phase
- Europe, US Next on ISIS’ Hit List, Says Saudi King; Seized ISIS Laptop Reveals Terrifying Bio-Warfare Plans
- iPhone 6 On Release Date To Feature Qualcomm MDM9625M LTE, 1GB RAM, Mobile Payment Deal With AMEX, 1334x750 Display
- Leaker of Actresses Nude Photos Accepting PayPal Donations in Exchange For Posting Alleged Sex Video of Jennifer Lawrence, Has Naked Pictures of 100 Hollywood A-Listers