Retail Real Estate: Reinventing Commercial Spaces

The term ‘retail property’ encompasses a variety of formats. Although we often think of retail stores in city centres, shopping streets or nearby, these commercial spaces differ depending on the sectors they serve. Spaces dedicated to high-end brands, for example, cannot be compared to those intended for everyday shopping.

City centres offer a variety of commercial spaces, ranging from large shopping malls to small boutiques. Shopping centres, which are true urban attractions, combine retail stores with complementary services such as restaurants, cinemas and gyms. However, institutions such as department stores have seen their popularity decline and some of these commercial spaces are now vacant.

There are also large-scale retailers, such as furniture stores, electronics stores and supermarkets, often located on the outskirts of towns or in dedicated retail areas such as retail parks.

The retail sector is going through a prolonged crisis, made worse by the rise of e-commerce, which is putting constant pressure on physical stores. Retailers now need to adopt omnichannel strategies to meet the new expectations of consumers, who are increasingly favouring online shopping.

The COVID-19 pandemic has accelerated these changes. While many physical stores have had to close their doors, online shopping has exploded. After the end of lockdowns, retailers hoped for a quick recovery, but the war in Ukraine, the energy crisis and inflation have continued to limit the sector’s revenues. This has led to the permanent closure of many stores, including large chains.

Despite these turbulent times, 2023 saw a rebound in the volume of retail space leased in city centres, reaching 540,000 m², a figure higher than in previous years. However, the market remains challenging, with investment in retail properties falling to €5.4 billion in 2023, down from €9 billion in 2022. Investors are increasingly turning to specialised shops, food stores and retail parks, which are considered more stable in the face of economic fluctuations.

Retail property is moving towards greater specialisation. Store concepts must adapt to an increasingly demanding customer base that favours omnichannel shopping. Large retail spaces, such as traditional shopping centres, must reinvent themselves by offering varied experiences and diversifying (restaurants, leisure activities, etc.) to attract consumers. However, chain stores no longer have the same capacity for expansion as before, as many retailers are reducing their floor space or closing stores.

Demand for retail space in city centres is more targeted, with a preference for prestigious locations and smaller formats. Specialised retail stores and retail parks are experiencing renewed interest as they meet immediate and local needs. These consumer venues guarantee more stable rents, with less risk for investors.

The main challenge remains economic uncertainty: inflation and energy prices continue to dampen consumption. However, with a more favourable economic outlook, the situation could improve and lead to stabilisation in rents. Landlords will need to be flexible in managing their retail spaces and look to alternative concepts such as urban logistics or health centres.

In the future, shopping centres will have to be creative to remain attractive. Some have already begun to transform themselves into health centres or urban logistics hubs. In addition, with the growing popularity of 15-minute cities (cities where everything is accessible within a 15-minute walk), commercial spaces will need to diversify and integrate more harmoniously into urban neighbourhoods, while meeting the local needs of the population.

In conclusion, the retail property sector is undergoing a radical transformation, but it can still benefit from this change by adapting to new consumption patterns and consumer expectations. The future of retail is likely to be more focused on local, specialised and flexible experiences.

In this context of rapid change in the retail sector, our role is to support retailers, investors and owners in adapting their real estate strategies. Our expertise covers: