M&G Real Estate has released its latest European Outlook report, providing a comprehensive, cross-sector review of prospects and performance across the continent.
Among the key takeaways, the report states that rental growth in the retail sector accelerated during the second quarter 2018, led by Paris (6.8 percent), Prague (5 percent) and Madrid (3.7 percent). With the largest inbound tourism market globally, Europe attracted more than 670 million international tourists in 2017, accounting for half of the world’s total.
Record forecasts of arrivals in established tourist destinations such as Milan, should continue to deliver healthy growth, with consumer sentiment across much of the continent running above historic averages.
Urban areas appear to be among the most popular destinations with tourist inflows accounting for almost two-thirds of the total number of tourist nights spent in the EU-28, which sees Milan, Rome and Paris taking top billing. Alongside Munich and Stockholm, these cities are also among some of the fastest growing urban populations, which are creating an increasing consumer base that requires goods and services.
An estimated 6 million Chinese citizens visited Europe in 2017, up 26 percent on 2016. With simplified visa requirements across the Schengen area and a record influx of tourists from Asian markets, particularly China, this catchment is expected to jump again, making Europe the second most popular tourist destination after Asia itself.
Such strong tourism characteristics have driven retailers toward space expansion in Europe’s major cities, soaking up the €228 billion ($263 billion) spent by Chinese tourists in 2017 — double that spent by North American visitors. These markets typically have among the largest percentage of international retailers as a result and are attracting new market entrants from this group.
Reflecting the optimism toward retail in dense, well-connected cities and strong regional centers, the M&G European Property Fund purchased two retail assets in Granada and Madrid earlier this year, joining a line-up of dominant assets including Luisen Forum, (Wiesbaden), Market Central da Vinci (Rome) and 30 Vimmelskaftet (Copenhagen). Both sites are in prime retail districts in their respective cities and are leased to successful national and international brands.
“In Europe, vacancy is low across supply-constrained high-street prime pitches, driven by continued strong retailer demand,” said Vanessa Muscara, associate director, property research, M&G Real Estate. “We see an even stronger correlation between the level of rental growth and visitor spend in major international tourist destinations which will drive income returns in the medium term.”
