European Retail Destination Index

European Retail Destination Index
 
The global European cities

17 November 2016, by Marie Hickey

‘Opportunity’ and lower occupational costs enhancing London’s appeal

 

London and Paris have jostled to be the top European destination, if not global destination, for international visitors for some years.

London has overtaken Paris according to MasterCard’s latest Global Destination Cities report seeing a record 19.8m international tourists spending a total of €17.8bn in 2015/16. This level of spend is 53.5% above that recorded for Paris and is even more pronounced when looking at the proportion dedicated to shopping. Visitors to London tend to allocate 46.7% of their total spend to shopping according to MasterCard. On Paris it is 16.7% (Figure 3).

FIGURE 3

Overseas visitor spend

 
Overseas visitor spend

Source: Savills Research, MasterCard Destination Index 2016

More recently, spending by overseas visitors in London received an added boost from the Brexit vote due to its impact on the value of the Pound. Based on a ‘basket of goods’ the average price of goods in London are now approximately 13% lower than those in Paris. As a result London’s West End saw a 3.0% annual increase in retail sales in July, the month immediately following Brexit. While this measure did not feed into the Retail Destination Index it does highlight the importance of visitor appeal in determining the appeal of a location to new international brands.

Paris’s international visitor numbers, and their spending, has been impacted by the recent terror attacks, which also led to softening in some other European city markets over the early part of 2016. Yet, the city remains a major destination with total retail sales, for the wider Paris region, far in excess of that seen for Greater London (Figure 4) ensuring the city’s attraction to prospective retailer entrants.

FIGURE 4

Retail sales and total occupational costs

(€ per sqm)

 
Retail sales and total occupational costs

Source: Savills Research, Oxford Economics

Despite the very apparent appeal of Paris to expanding retail brands, London scored better overall on our Retail Destination Index.

London’s higher score, while largely determined by its underlying operational fundamentals related to retail spend and tourist flows, was enhanced by its ‘opportunity’ potential and lower total occupational costs.

Savills has devised a relatively simple measure of retailer ‘opportunity’. This is based on the total number of standalone stores the top 10 global fashion brands/groups (based on global turnover) have in the city relative to population and visitor numbers.

Based on this measure London would appear relatively under supplied compared to Paris with 13.1 stores per 1 million of population and 3.9 per 1 million of international tourists. This compares to 17.3 and 5.9 respectively in Paris. For international brands looking to expand, this suggests the level of competition may be less pronounced in London, albeit this will be largely dependent on the nature of their product offer and existing competition.

London also outperformed Paris in terms of prime total occupational costs, with an indicative cost of €21,700 per sqm per annum, 6.7% lower than Paris. The revenue potential of London and its lower occupational costs suggests the profit margin offered by a London store may be greater than that of a similar store in Paris. This will enhance its appeal to new international entrants, hence its place at the top of our Retail Destination Index.

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Key Contacts

Marie Hickey

Marie Hickey

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 3320 8288

 

Lydia Brissy

Lydia Brissy

Director
European Research

Savills Paris

+ 33 (0) 1 44 51 73 88

 

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