Drivers for change

As recently as 10 years ago, there was a much greater distinction between different retail formats than there is today. High streets and shopping centres were fashion-led, retail parks were bulky goods-led, supermarkets were standalone, and online and in-store were two separate propositions. Since then, a number of key drivers have fundamentally changed the approach of retailers, developers and landlords, which has blurred formats, but also more clearly defined the places with the greatest success. Several of these trends emerged from technological and consumer evolution that followed the Global Financial Crisis, but it took the pandemic and cost-of-living crisis to bring many of them into focus and become more universally adopted.

• Consumer behaviour: More value-seeking and time-pressed shoppers benefiting smaller, urban-edge retail parks—while regional malls win when they deliver experiences beyond pure shopping. ‘On demand’ consumerism drives the need for convenience (easy) and experience (fulfilment) in all retail engagements.
• E-commerce maturity & omnichannel: Online growth and rising service expectations turn stores into the physical point where all channels converge.
• Economic evolution & household budgets: Elevated inflation, higher interest rates, and cautious sentiment have expanded the market for value/low-cost retailers.
• Tourism dynamics: Strong inbound tourism lifts outlets and destination regional malls, reinforcing brands’ appetite for those formats.
• Retailer portfolio strategy: Consolidation into fewer, larger, more productive stores. Increased voids in saturated markets.
• Profitability: Margins are coming down across the board so landlords have to think about more ways of capturing spend and increasing dwell times, while retailers are thinking about extending their ranges and increasing basket sizes. 

Retail Parks

Retail parks are becoming more convenience and services-led, with a transition to non-food retail brands (e.g. fashion/accessories) that in the past would have focused on shopping centre and high street locations. The strongest retail parks are no longer those that are primarily bulky goods retailers (e.g. electricals/furniture).

Value goods have been the most important differentiator in recent years, with shopping experience being measured by accessibility and efficiency. The trend for increased fashion and sports goods on retail parks seen in the UK for the last decade has spread to other parts of Europe, such as France and Poland. At the same time, retail parks have grown strongly, particularly through the proliferation of smaller schemes located closer to cities and oriented towards convenience shopping.

One regional difference worth highlighting is that in Southern and Eastern Europe, limited availability of prime high-street/mall units and a thin shopping centre development pipeline is pushing retailers to retail parks, where there is greater unit availability. In the UK, retail park availability is so low, some retailers are reversing the trend and returning to the secondary high streets where occupational costs have come down.

Shopping Centres & High Streets

The expansion within the retail park sector across Europe over the last decade has polarised the high street and shopping centre markets, often requiring radical adaptation in order to stay relevant. Prime regional or city centre shopping centres and high streets continue to focus on quality, leisure and experience – all designed to increase in-person experiences and basket size. The strongest occupier focus has been on the best schemes with the continued expansion of strong international fashion and cosmetics brands, where they benefit from greater visibility and stronger drawing power. The result is fewer, more dominant locations.

However, legacy shopping centres in smaller saturated local markets are responding through increased provision of value goods, retail services, health, and other community-focused uses in order to stay relevant. A number of shopping centres in the UK, France, Germany, Poland and the Netherlands have been completely redeveloped for non-retail uses because they were outflanked by more agile and convenient retail parks.

Improving F&B has played a key role in redefining the retail mix across the board, with quick and convenient operators being more prevalent in community assets and with more dining options in prime locations. In key regional cities, F&B can often account for a third of supply. However, F&B can’t be the answer to every problem and local saturation is applying pressure in some markets.

With greater consumer emphasis on leisure time, entertainment uses are evolving too, from the traditional cinema and bowling offer, to a more varied interactive offer of indoor amusements, competitive socialising and immersive leisure. These uses are accounting for a more significant proportion of shopping centre tenants and are key to improving the family destination offer (e.g. via the repositioning of X-Madrid, Spain and Hopa Lupa Ludz, Poland).

Brands increasingly look to hybrid formats

Scheme tenant mixes are not the only thing diversifying. Retailers are thinking about factors that will increase their destination appeal, extend dwell time, provide additional income streams, or product placement that build brand exposure through social media channels. The emphasis is on bringing people to store, where operational and occupational costs are typically more favourable than online transactions and in-person experiences can be had. For some brands, diversification is not a new concept, but the last few years have seen this become a genuine European-wide trend. In several prime and luxury markets, it can be beneficial to get one flagship store compared to a number of smaller shops across the city centre, with large stores providing an opportunity to create a more unique and exciting offer to lure customers in.

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