our top 30 global retail tech lessons from...

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TECH LESSONS FROM CHINESE RETAILERSPhysical stores have not paid the price for a booming online retail market in China.

OUR TOP 30 GLOBAL RETAIL CITIESThe most attractive strategic global cities for expanding international brands.

INTERNATIONAL OPERATORS WANT A SLICE OF LONDON2018 will be a record year for new F&B entrants to the capital with more openings on the menu.

*Gentle Monster, Argyll Street, London

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S A V I L L S M A P I C M A T T E R S S A V I L L S M A P I C M A T T E R S

Throughout 2018, the question on everyone’s lips has undoubtedly been “what's next for retail?” With words like “innovation”, “technology” and “disruptor brands” being batted around the retail and leisure court, we are in the middle of an exciting yet tense phase when it comes to waiting and seeing how the final outcome will play out. While it has been a challenging year for retail and leisure in some countries, there are still opportunities to be had for all.

Technology has undoubtedly been the sweetheart of recent years, being courted by fashion and F&B brands, leisure operators and even warehouse landlords. When it comes to inspiration in the technology sector, we believe that there is much to be learnt from Chinese retailer brands (p.6) who are leading the charge when it comes to the digitalisation of the sector. This is even a trend that has migrated to the department store as discussed in our article “Innovation is key for department store survival” (p.34), which explains how the retail and leisure sector must acknowledge e-commerce alongside changing consumer habits in order to remain afloat.

In our Q&A section, we speak to a group of Savills retail experts (p.16) about the use of digital and how its blurring with physical retail will be increasingly important as brands look to optimise a seamless experience for customers. For others, the real prospects lie within the globalisation of retail and cross-border integration. We take a look at some of Savills impressive work across the world (p.20) with

projects in London, Poland, Hong Kong and China all proving that, no matter the location, there are exciting opportunities to be had.

With themes such as globalisation and technology expected to remain of utmost importance, we cannot deny the role that logistics and distribution warehousing will have to play in retail. We speak to Savills Sally Duggleby about the sheer scale of this sector and why it is really coming into its own.

So, without further ado, we present our debut edition of MAPIC Matters and hope you enjoy all it has to offer.

Larry Brennan

Savills Head of European Retail

RE-COMMERCE PLATFORMS MAKE THE LEAP INTO PHYSICAL RETAIL

TECH LESSONS FROM CHINESE RETAILERS

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CONSUMER ENGAGEMENT IS MOVING BEYOND STORES FOR RETAIL BRANDS

SAVILLS TOP 30 GLOBAL RETAIL CITIES

HONG KONG RETAIL IS ON A ROLL

WHAT WILL BE THE BIGGEST INNOVATION IN RETAIL OVER THE NEXT FIVE YEARS?

INTERNATIONAL BRANDS WANT A SLICE OF LONDON

MANHATTAN TRANSFER

AROUND THE WORLD WITH SAVILLS

12INTERNATIONAL FOOD & BEVERAGE BRANDS SEIZE OPPORTUNITIES IN THE UK

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VIVE LA FRANCE

INNOVATION IS KEY FOR DEPARTMENT STORE SURVIVAL

SOUTH KOREAN RETAIL BRANDS MAKE THE LEAP BEYOND ASIA PACIFIC MARKETS

READY, STEADY, GO!

FIVE minutes WITH...

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KEY CONTACTS

SAVILLS BEST RETAURANT GUIDE

Website: savills.com/mapic

Social media: @savills

On the cover: Gentle Monster

Designed and produced by: Savills Marketing

Foreword

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RE-COMMERCE PLATFORMS MAKE THE leap into physical retail

Selling second hand goods online is hugely successful. So why are the market’s leading brands moving onto the high street?

Re-commerce is the process of selling previously owned clothing and other products to consumers or companies through online distribution channels. It’s one of the fastest growing sectors of the retail market, with a global worth of an estimated US$20 billion in 2017 and on track to reach $41 billion by the end of 2022*.

Now leading re-commerce platforms are making the transition from online to physical retail, with brands such as Depop and thredUP opening bricks-and-mortar stores.

London-based Depop has around nine million users, with some 60,000 new items added via the app each day. Having secured around $42.5 million of funding, Depop launched a store in LA and New York this year, with plans to open in London and Milan before the end of 2019. thredUP is in various high street and shopping mall locations in the US, with a further 100 store openings mapped out after securing $130 million funding.

These are not the only examples: US-based The RealReal, an online luxury resale marketplace, has opened a 6,000 sq ft store on New York’s Wooster Street and a 12,000 sq ft store on Melrose Avenue, LA. Similarly, luxury handbag reseller Rebag opened a second permanent location on Madison Avenue, New York in April this year.

So what is behind the growth of re-commerce and its transition from digital to physical retail space? One key factor is changing consumer behaviour driven by millennials and post millennials (under 21s). For these consumers flexibility and variety are key, which is also demonstrated by the success of clothing and accessory rental services such as Rent the Runway.

The ability to generate additional income is an added boon to a demographic group, particularly in the case of Europe and North America, which is set to be less affluent than previous generations. Therefore re-commerce platforms such as thredUP, which boasts over 35,000 brands, are appealing.

*According to thredUP’s 2018 Resale Report

There is also an increased focus on sustainability among consumers and reselling is the ultimate example of this, extending a product’s lifespan and encouraging recycling. Major brands are getting behind this way of thinking, with Stella McCartney offering vouchers to customers who resell via The RealReal and Patagonia’s Worn Wear hub, encouraging shoppers to repair and trade in products or buy them second hand.

Re-commerce platforms are ideally placed to bridge the gap between online and offline retail. Many have invested heavily in their websites and apps to create brand awareness and a user-friendly interface, building up large communities of followers and sellers in the process. App data determining the most searched for products in a geographical area can then be used to influence stock in physical stores accordingly. Physical stores also offer an added benefit of raising brand awareness and a place to engage with individual sellers and members.

The most popular individual sellers on online platforms can also be monitored, allowing brands to buy products from them direct and use them to create iconic storefront collections.

To date, stores opened in the US have been within a mix of high street and mall locations. Sizes vary from smaller stores right up to 12,000 sq ft. This flexibility will no doubt be appealing to landlords as more re-commerce brands begin to open stores.

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S A V I L L S M A P I C M A T T E R S

China has the highest volume of online retail sales in the world. But it has not been at the expense of the physical store. So what lessons can the global retail market take from China’s experiences?

The figures certainly make fascinating reading. Online sales in China were around US$420 billion in 2017 and, according to Statista company EcommerceDB, this is expected to grow by about 16 per cent annually to 2020. In contrast, the US – the next largest market – currently not only has lower ecommerce sales of about US$393 billion, but sales are only growing at around 11 per cent.

And yet bricks-and-mortar sales still account for approximately 80-85 per cent of all retail purchases in China. This can be partly attributed to the fact that stores have not stood still. Chinese retailers were quick to anticipate the revolution in the retail sector and were early adopters of in-store digital technology, which has played a significant role in maintaining physical sales.

With Chinese retailers seemingly making such a success story of integrating tech, and the nation being a testing ground for the latest innovations, global retailers would do well to sit up and pay attention.

FOCUS ON PAYMENT METHODS

Payments via mobile phones reached US$16 trillion in China in 2017 – more than a threefold increase on 2016 volumes, according to Analysys. This is due to the dominance of two mobile payment behemoths: Alipay, set up by ecommerce giant Alibaba, and WeChat Pay, owned by Chinese social media organisation Tencent. By making mobile payment a completely seamless experience for consumers, these companies have succeeded in ensuring that mobile is the dominant method of payment for B2C transactions in China. Retailers around the world should take note: not only does payment by mobile increase consumer spend, but Chinese visitors abroad expect to be able to use it to pay for their purchases. In the UK Harrods and Selfridges have already implemented Alipay in their stores so they don’t miss out on valuable Chinese visitor spend.

THINK BIG

In China things move much further and faster. Amazon has rolled out four of its cashless Amazon Go stores since launching the concept in 2016, but in China things move much further and faster. BingoBox, the unmanned convenience store, was launched in the same year and currently has 300 locations in 30 Chinese cities. Rolling out fast and at scale, BingoBox has effectively cornered the automated market and made it hard for others to compete. Amazon’s technology

Physical stores have not paid the price for a booming online retail market in China.By James Macdonald, Savills head of research, China.

might be sleeker, but the benefits of expanding fast, capturing the public’s attention and becoming the dominant market player are perhaps more valuable than spending time tweaking algorithms.

EXPAND ON EXPERIENCE

Bricks-and-mortar retailers have been obsessed with delivering ‘experience’ to customers for several years now, but again Chinese retailers have taken this to the next level. Alibaba has opened over 60 of its Hema Xiansheng supermarkets since 2015. In addition to allowing mobile ordering and mobile payment, each has a food court which allows customers to pick choose their food and have it cooked for them on site, before collecting it once they’ve completed their shop. In addition, each store, through a highly efficient in-store fulfillment process, provides a 30-minute delivery service for consumers located within 3km – something most grocers can only dream of.

Alibaba has also opened a robot serviced restaurant in one Hema store, where all services are self-helped, from choosing table via a machine at the front of the restaurant to ordering and payment through the Hema APP or by scanning a QR code, to be being served your meal by robot.

ALIBABA HAS ALSO OPENED A ROBOT SERVICED RESTAURANT IN ONE HEMA STORE, WHERE ALL SERVICES ARE SELF-HELPED.

Tech lessons FROM CHINESE RETAILERS


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CONSUMER ENGAGEMENT

is moving beyond STORES FOR RETAIL BRANDSBranded hotels aim to deliver the experience and convenience that today’s consumers demand.

The store has traditionally been the primary channel for retail and consumer brands to engage with customers. And while the store continues to play a vital role, brands are also looking to new channels to widen and deepen this engagement.

One such channel is the development of branded hotels. The concept itself is nothing new – a number of luxury brands such as Versace already design and/or own affiliated hotels. However, we are now seeing lifestyle brands branch out into the market, too. The ultimate aim is to deliver an experience and, in some cases, an opportunity for consumers to test products.

Muji, West Elm, BrewDog, Laura Ashley and Equinox have launched, or are about to launch, hotels with their branding. BrewDog recently opened the DogHouse hotel next to its US brewery in Columbus, Ohio. Muji has opened two hotels this year, in Schenzhen and Beijing, designed around the full Muji aesthetic with in-room Muji products and onsite stores. US lifestyle and furniture brand West Elm, in partnership with hospitality management team DDK, will be opening its first hotels in the US in 2019 with six sites currently secured.

This approach enables brands to create a fully rounded immersive experience – in many cases, customers can try products out, thus blurring the boundaries between retail and hospitality. It also allows brands to transcend their products and offering to create a truly holistic lifestyle brand. Something that Equinox, the luxury fitness gym and owner of SoulCycle, is hoping to establish with its hotel brand, the first of which is due to open in New York’s Hudson Yard in 2019.

Having a hotel also allows retailers to leverage an additional revenue stream from their brand, something that is increasingly attractive against the current retail backdrop, where margins are being squeezed.

On the flipside, we are also seeing hospitality brands move into the retail sphere. Soho House launched

interiors brand Soho Home in 2016, allowing consumers to recreate the same look and feel in their own house, although this has not extended into the opening of stores.

For hotel developers and operators, the attractiveness of a retail brand tie-up is that it allows them to tap into an awareness and loyalty that may not exist for emerging hotel brands. In a well-supplied hotel market, it can also act as significant differentiator to the benefit of operational performance.

This blurring between what a retail brand is and does reflects the new era of retailing in which we find ourselves. Physical retail is far from being irrelevant, with the store being reinvented to deliver the engagement, experience and convenience consumers demand. By moving into hospitality, retail brands are taking things to the next level and, as seen with other consumer brands, this doesn’t need to stop at hotels.

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SAVILLS TOP 30 GLOBAL RETAIL CITIES

Source:

Savills Research Oxford Economics Local Statistical Offices Mastercard Destination Index OAG

Measures employed:

2016 International overnight visitors (Mastercard)

2017 Airport Hub connectivity

2017 Retail Sales (OE)

Retail sales forecast (2018-2023 annual av; inflation adjusted)

2017 Affluent HHD's (annual incomes US$70k+)

Affluent HHD ave annual growth 2018-23 (inflation adjusted)

2017 unemployment rate

2 18

26

29 30

20

14

15

85

2527

17

21

22

16

13

6

CityRetailer

attractiveness ranking

London 1

New York 2

Hong Kong 3

Paris 4

Tokyo 5

Los Angeles 6

Shanghai 7

Seoul 8

Singapore 9

Kuala Lumpur 10

Bangkok 11

Toronto 12

Miami 13

Dubai 14

Sydney 15

Mexico City 16

Munich 17

Madrid 18

Sao Paulo 19

Moscow 20

Milan 21

Vancouver 22

Amsterdam 23

Macau 24

Berlin 25

Dublin 26

Prague 27

Delhi 28

Oslo 29

Stockholm 30

Amsterdam23

Bangkok11

Delhi28

Kuala Lumpar10

Hong Kong3

Shanghai7

London1

Sao Paulo19

Toronto12 4

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There is no doubt that retailing has become an increasingly international business. While the physical store still plays a vital role for international brands, e-commerce has resulted in a shift in focus towards opening fewer stores in strategic cities and locations. That is locations that provide greater brand exposure and enhanced customer engagement, ultimately helping to drive online sales.

So, what are the most attractive strategic global cities for expanding international brands? Brands and retailers will each have their own specific requirements but there are a number of high level macro characteristics that may make some cities more attractive than others as initial targets. The Savills Global

Retail City benchmark draws on these macro indicators to rank 30 cities globally in terms of their overall attractiveness and which of these offer the greatest growth potential.

London, New York and Hong Kong all feature in the top three in terms of overall attractiveness, highlighting those that offer the greatest growth potential. For brands looking for emerging growth markets, while London and Hong Kong still both feature, Kuala Lumpur, Bangkok, Shanghai and Delhi all stand out in Asia. In the Americas, it is Toronto and Sao Paulo that are forecast to lead in terms of growth potential, with Amsterdam a key future growth city in Europe supported in part by the global connectivity of its international airport. The future high growth markets are highlighted in pink.

Key:

Future high growth markets

S A V I L L S M A P I C M A T T E R SS A V I L L S M A P I C M A T T E R S

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Historically, the UK has been a very competitive market for the food and beverage (F&B) sector, meaning that a number of international F&B operators have been circling for some time without being able to secure sites.

But market conditions in the UK have become more challenging recently, with rises in business rates and the living wage, staff retention issues and Brexit-related uncertainty all contributing to this. Less competition from UK operators, has given international F&B brands the chance to move in.

Chinese hot pot chain Hai di Lao, which has been keen to enter the UK market via a site in London for a number of years, recently secured restaurant space at The Trocadero in Piccadilly Circus. This restaurant will become Hai di Lao’s UK flagship as the brand seeks further sites in major European cities.

Following huge success in Poland (opening more than 40 sites since 2002), North Fish will start opening UK sites from 2019. The quick service restaurant chain, which specialises in healthy fish and seafood dishes, is targeting high street and shopping centre locations. Norwegian brand Egon is also known to be seeking its first UK sites.

INTERNATIONAL FOOD & BEVERAGE BRANDS SEIZE OPPORTUNITIES IN THE UK

Market conditions have finally given overseas operators the opportunity they’ve been waiting for.

FOR INTERNATIONAL NEW ENTRANTS

Established European cities for F&B: London, Paris, Berlin, Milan, Barcelona

Ones to watch: Oslo, Frankfurt, Rome, Manchester, Birmingham

TOTAL NUMBER OF SITES IN THE UK

David Bell, Savills head of UK & European leisure says: ‘High-footfall, high-profile locations are ultimately what operators desire and there is much pressure to get the first site right so that it can act as a spring board for future growth.’

As David points out, the majority of international new entrants to the UK are relatively high end, with a focus on quality and service, or ‘grab-and-go’ operators, such as Ole & Steen (Danish), Simit Sarayi (Turkish), Nordic Bakery (Scandinavian) and Cojean (French), who focus on speed of service. Few occupy the middle ground. ‘This reflects consumer appetite in the UK. Successful new entrants also tend to focus on one style of product and do it extremely well, rather than trying to cater to the masses.’

Meanwhile, not only are UK market conditions presenting new opportunities for international F&B brands, other well-established brands that already have strong representation in the UK, such as Vapiano, Wagamama and Five Guys, are now looking to grow their various portfolios across key European destinations and ultimately increase revenue by entering new markets. 7

source:https://uk.vapiano.com/en/restaurants

70+

source:

https://www.fiveguys.co.uk/location

THE MAJORITY OF ENTRANTS TO THE UK ARE RELATIVELY HIGH END OR 'GRAB-AND-GO' OPERATORS.

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After a turbulent few years, retail sales in Hong Kong are beginning to pick up, rising 13 per cent year-on-year (YoY) across the whole sector.

The turnaround has been driven both by a recovery in spending and by an increase in visitor numbers from mainland China. It’s no coincidence that the top performing sectors are those that are traditionally most popular with mainland shopprs: jewellery, watches, clocks and valuable gifts (up 23.3 per cent YoY) and medicines and cosmetics (17.7 per cent YoY).

An increase in spending is giving Hong Kong a boost. By Nick Bradstreet, Savills managing director and head of leasing, Hong Kong.

RETAIL IS ON A ROLL

Interestingly, same-day shoppers from the mainland to Hong Kong are growing at a much faster rate than overnight visitors. And while the latter are traditionally bigger spenders, favouring luxury goods, the former buy more convenience goods, such as personal care items, hence the growth in cosmetics spend. Consumer spend is also up among local shoppers, rising 17.4 per cent over the first quarter of 2018.

This positivity among all types of consumer has combined to show clear signs of a recovery, with shopping malls reporting brisk sales and the luxury

segment enjoying a return to form. This has resulted in improvements on the ground among Hong Kong mall owners. After a period of relative sluggishness in 2017, major shopping mall rents across all districts have begun to respond to rising retail sales and were up 2.0 per cent YoY in the second quarter of 2018, while street shop rents followed suit with a 2.4 per cent YoY increase.

There are, of course, variations in the market: prime malls in Central and Tsim Sha Tsui continue to thrive (rents have grown 210 per cent and 294 per cent respectively in these locations since 2009) but lagging somewhat are Wanchai and Causeway Bay. This is due to their markets being rather historically oversaturated and over-priced in 2014 so they were harder hit when tourist spending dropped in 2016 and are taking longer to recover.

An above-average 3.26 million sq ft of new prime mall supply is expected to be delivered in Hong Kong over 2018 and 2019, much of it due to come on stream in the New Territories. Two areas in particular look set to see their shopping environments given a boost by new openings this year: Tsuen Wan will see OP Mall and Nina Mall completed, while Alto Residences, Monterey and Papillons Square will come online in Tseung Kwan O later in 2018.

2019 looks set to be one of the highest years of retail supply we have seen since 2006, with around 2 million sq ft. Half of that total will come from one project alone, the much anticipated K11 MUSEA in Tim Sha Tsui – a new landmark retail/museum hybrid which will form the basis of a new ultra high-end experiential retail, art, cultural and dining destination.

Looking ahead, retail sales could be threatened by a potential stronger Dollar/weaker Renminbi while the ongoing dispute between US and China over tariffs may have an impact on the broader economy, which could undermine both overseas and domestic retail spending. That said, we predict that confidence among landlords and retailers will continue to build, ensuring that the outlook for Hong Kong’s retail sales remains positive.

Hong Kong

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“We strongly believe that in the next coming years the physical store, whether or not a part of a multichannel strategy, will remain central in the purchase process. Nevertheless, technology and big data has already started to transform it. The product itself will no longer be able to rely on its “physical value” but will have to be a part of a process which starts engaging customers when they are at home, continuing the store visit long after they have left the store. To be able to generate this never-ending customer journey, retailers will have to pursue personalisation and integrated technology to offer a seamless experience.”

"Retailers will take an increasingly global view of their store networks, considering the European, North American and Asian markets simultaneously rather than approaching one by one. This focus on global strategic positioning will ultimately mean less stores in each of the regional markets coupled with a shift towards larger flagship venues. Stores themselves will evolve further away from the traditional retail format focussed on sales into spaces for brand engagement and interaction."

"Technology will continue to play a more integral role in retail, not only in regards to marketing and logistics, but also in the customer experience. Brands will increasingly use tech to gather data about customers such as purchasing history, using this to personalise the shopping experience and anticipate product preferences. Online tech will allow customers to virtually engage with and try products while the use of augmented reality in store will enhance the customer experience and in turn drive more foot traffic for landlords. Use of robots in warehouses and store rooms will lower labour requirements and increase cost effectiveness."

“I believe the future of retail will centre around mixed-use. We’ll start to see more mixed occupiers within urban areas that will incorporate retail, businesses and homes. This in turn will lead to more shared consolidation and distribution centres that will service these new multi-tenanted schemes, particularly in expensive urban areas.”

"In the US we are seeing an exciting transition in the shopping environment as developers and owners strive to offer a seamless, integrated online and offline experience. Looking ahead, the repurposing of newly available space will see traditional retail evolve into lifestyle and community-oriented destinations. The emerging concept of trendy grocery stores, boutique fitness and medical providers located alongside traditional retailers will become more pronounced. Space previously occupied by large, anchor retailers is being reimagined as residential towers, office space, and co-working offerings to create full service destinations. This major innovation will become increasingly popular with the next generation of consumers."

"Demographic, cultural and technological shifts are giving rise to totally new concepts that never existed before, such as rental retail, re-commerce retail and subscription retail. These began as purely online propositions but many are now moving into physical spaces, such as Depop and Rent the Runway with really exciting, digitally enabled store formats. I believe this will gather pace over the next few years as brands look to widen their reach and engagement with their customers."

CHRISTIAN RECALCATI Head of European Property Management

ANTHONY SELWYNHead of London & International Retail

JOEY CHIOHead of Retail Tenant Representation, China

SALLY DUGGLEBYHead of UK Industrial & Logistics Occupier Services

SUSAN KURLANDCoHead, Global Retail Services, USA

WHAT WILL BE THE BIGGEST INNOVATION IN RETAIL OVER THE NEXT FIVE YEARS?Our retail experts from around the world discuss.

THE PHYSICAL STORE, WHETHER OR NOT A PART OF A MULTICHANNEL STRATEGY, WILL REMAIN CENTRAL IN THE PURCHASE PROCESS.

MARIE HICKEYRetail Research Director

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Thirty-six international retail and leisure brands have opened their first ever UK outpost in London in 2018 to date, exceeding the 2017 full year total of 32. The 2018 total could be in the region of 45, bringing it closer to the 2016 peak of 53.

So far, 39 per cent of new retail and leisure entrants in London this year have been international food and beverage (F&B) operators, including Greyhound Café and BunCo. North American F&B concepts have made a comeback, with five new entrants in the year to date, including by CHLOE, Which Wich and Inko Nito. There has also been an increase in interest and activity from Asia Pacific-based operators with three new entrants in 2018, including Singaporean brand Old Chang Kee and Chinese hot pot chain Hai Di Lao. Based on known pipeline, 2018 will be a record year for new F&B international entrants to London, with close to 20 openings.

Marie Hickey, Savills retail research director comments, ‘While there have been operational challenges facing the UK F&B market, people are still going out to eat and spend is forecast to increase 8 per cent over the next five years. This continues to attract new international operators to the capital.’

2018 will be a record year for new food & beverage entrants to the capital with more openings on the menu.

OF LONDON

INTERNATIONAL BRANDS WANT A

The total number of non-F&B new retail and leisure entrants to London in 2018 is also expected to be up on last year. So far in 2018, there have been 22 non-F&B new entrants with a further four due to open soon and more in the pipeline before the end of the year. Europe has been the main source market for non-F&B new entrants, with French and Italian brands dominating. Examples include French online brand Sézane opening a permanent site in Westbourne Grove and Jimmy Fairly taking space on Regent Street.

Laura Salisbury Jones, Savills associate director, Central London and European retail adds: 'Despite a number of well-publicised challenges facing the UK retail and leisure market currently, it is clear that London’s appeal remains for international brands. In some cases these challenges are creating opportunities for new entrants. The strong momentum we have seen in new entrants to the capital so far in 2018 looks set to continue in the remainder of this year and beyond.’

SO FAR IN 2018, 39 PER CENT OF NEW RETAIL AND LEISURE ENTRANTS IN LONDON HAVE BEEN INTERNATIONAL FOOD AND BEVERAGE OPERATORS.

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AROUND THE WORLD WITH SAVILLS

LONDONUK

Client: Gentle Monster

Location: Argyll Street

Role: Agency

Size: 840 sq m 9,000 sq ft

LONDONUK

Client: Hai di Lao

Location: Trocadero

Role: Agency

Size: 1,070 sq m 11,500 sq ft

KATOWICEPOLAND

Client: Savills Investment Management

Location: Galeria Katowicka

Price: €280m

Role: Buy-side advisorySize: 50,170 sq m 540,000 sq ft

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BOLOGNAITALY

Client: UBS Real Estate

Location: Via Rizzoli 16-18

Role: Sale advice

Size: 2,300 sq m 24,760 sq ft

Price: € 35 million

SERVONFRANCE

Client: Eden

Role: Agency

Size: 35,000 sq m 375,740 sq ft

BERLINGERMANY

Client: Roberto Cavalli

Location: Kurfürstendamm 184

Role: Landlord and tenant representation


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SEOULSOUTH KOREA

Client: The Korean Teachers’ Credit Union (KTCU)

Location: KTCU Building, 50 Yeouinaru-ro, Yeongdeungpo-gu, Seoul, South Korea

Role: Consulting services

Size: 2,315 sq m 24,920 sq ft

HONG KONGHONG KONG

Client: Limited Brands

Location: Capitol Centre, Causeway Bay, Hong Kong

Role: Acquisition

Size: 4,760 sq m 51,200 sq ft

SHANGHAICHINA

Client: TESLA

Location: Shanghai

Role: Tenant representation


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TYRESOSWEDEN

Client: ESCF

Location: Tyreso Shopping

Centre

Role: Technical

due diligence

LISBONPORTUGAL

Client: Chanel

Location: Marquês de Pombal,

Lisbon

Role: Turnkey project

Size: 300 sq m

3,230 sq ft

MALAGASPAIN

Client: INDITEX

Location: Calle Liborio Garcia 8, Málaga

Role: Agency

Size: 1,700 sq m 18,300 sq ft

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HAT

TAN

T

RAN

SFE

RA seismic shift in consumer demand is having a dramatic effect on the city’s retail landscape.By Victoria Oliva, Savills Studley managing director, USA.

If you believe everything you read about the state of the retail industry in the US you’d expect to see boarded-up stores, whole blocks of vacant retail space and urban high streets void of shoppers. But this just isn’t the case. The truth is that while the industry has certainly experienced a reset in terms of store closures, the retail sector in Manhattan continues to find success as retailers redefine the role of the bricks-and-mortar store.

Why? Because the Manhattan market has three key ingredients for a healthy retail sector: a large, digitallyfluent customer base; a position as an international retail city; and an active shopper sector, both local and tourist, seeking unique ways to connect to its favourite brands.

The numbers are impressive:

A CITY POPULATION OF OVER

8.6 MILLION(US Census estimate)

62.8 MILLIONTOURISTS IN 2017

(NYC & Company)

45 BILLIONTOURISTS SPEND IN 2016

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There’s no question that the retail industry is at an inflection point, but the changes are not cyclical – they are structural. Millennials, and other digitally fluent shoppers, are realigning the mix between bricks-and-mortar and online retailing globally. This is definitely having an impact on Manhattan’s retail real estate sector as retailers realise they no longer need multiple stores for the convenience of their customers, but rather can operate fewer, strategically located stores to maintain and even grow their target customer base.

One key structural change is the trend towards experiential retailing, with a particular focus on accessibility and creativity. From pure-play online retailers recognising the value in bricks and mortar to established global brands enhancing their flagship locations, successful retailers across the board are providing their NYC customer base with in-store experiences like never before.

A prime example of this is apparel retailer Bonobos. Its bricks-and-mortar stores seamlessly integrate with its online platform, ensuring products are easily accessible to shoppers. Its ‘guide shops’ operate as showrooms in which customers can experience fabrics and fit, and receive feedback from sales staff. Items chosen in-store are then shipped to the customer’s home. Customers have an online Bonobos profile which outlines fit preferences, along with past orders, so they can easily order additional items tailored to their preferences.

As retailers continue to get creative with their in-store offering, one brand which has truly embraced the trend of personalisation is the renowned, Coach. Its Fifth Avenue flagship store has recently introduced Coach Create, a design-it-yourself experience that takes ‘customisation to the next level’. Here the consumer can add details such as monograms, pins, rivets and straps to their ready-to-wear bags, according to taste. The service, which is only available in-store, gives consumers a truly curated experience and, in turn, introduces them to a new way of engaging with the brand.

THE SIZE, PURPOSE AND DESIGN OF THE TYPICAL RETAIL FLAGSHIP STORE WILL SHIFT... THIS WILL MEAN SMALLER FLAGSHIPS, OFFERING BRAND EXPERIENCE IN AN ENVIRONMENT THAT ENTERTAINS, EXCITES AND CONNECTS WITH THE CONSUMER.

RIGHT: Personalisation offering on the main floor of Coach's flagship store on Fifth Avenue

Such retailers continue to redefine the traditional bricks-and-mortar location in Manhattan, no longer seeing it as merely a box for selling a product. They are integrating their stores with online retailing by selling a ‘lifestyle’; a tailored experience which resonates with the consumer and ultimately results in a connection to the brand that goes way beyond the physical sensation of seeing a product on a rack or shelf and focuses on the unique desires of the individual shopper. In the long run, the size, purpose and design of the typical retail flagship store will shift along with consumer buying habits and this will mean smaller flagships, offering brand experience in an environment that entertains, excites and connects with the consumer through innovative design, imagery and technical infrastructure.

The retail landscape in Manhattan has changed dramatically, reflecting a seismic shift in consumer demand. However, the size, depth and diversity of the Manhattan retail market provides retailers with an enormous canvas upon which to create a portrait of a brand that appeals to a large, diverse demographic.

BELOW: Rexy the dinosaur mascot inside the Coach flagship store on Fifth Avenue

ABOVE: Bonobos flagship store on Fifth Avenue

Struggling brands in the UK could benefit from a little Parisian savoir faire.By Faustine Godbert, Savills high street manager, France.

WHAT BRITISH RETAILERS CAN LEARN FROM THE FRENCH

VIVE LA FRANCE

With many sections of the British retail sector currently struggling, perhaps it’s time we looked to other countries for ways to breathe new life into the UK retail scene.

In France, retail and leisure operators have been very successful in reinventing and modernising their brands. Embracing rather than dismissing the growing presence of online retail has been a key weapon in their armoury and it has paid dividends.

Nowhere is this more relevant than in Paris, a city where experience is everything. Here, consumer giant L’Oréal has joined forces with retailer Groupe Casino to debut Le drugstore parisien, a beauty and wellbeing concept that offers something fresh to the savvy, urban consumer.

Following on from a similar 'Phygital' concept launched by beauty brand Sephora earlier this year, Le drugstore parisien operates from two key locations and provides a personalised experience that shoppers simply cannot get from the comfort of their mobile devices. The stores, which are open between 10am and midnight, are a combination of pharmacy, health shop and beauty


outlet, offering skincare and make up, including a number of L’Oréal brands, over-the-counter medicines and wellbeing products, as well as healthy snacks and beverages.

With the lines increasingly blurring between work, culture and fun, Le drugstore parisien is a one stop shop that appeals to Paris’s office-based population as well as providing the answer for the cash-rich, time-poor shopper. It also marks a significant change in French retail. By paying particular attention to new ways in which to flexibly utilise retail space, the venture puts customers at the heart of its operation. Promising more than a simple shopping experience and instead focusing on events, exclusive brands and on-site amenities (think Wi-Fi, phone charging points and even a dry-cleaning service), the stores are expected to spark similar projects across the city.

Amidst the current struggles of some brands across the UK, could this fresh and flexible approach be the answer the retail industry has been looking for?

IN FRANCE, RETAIL AND LEISURE OPERATORS HAVE BEEN VERY SUCCESSFUL IN REINVENTING AND MODERNISING THEIR BRANDS.

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Retailers in the US and China are showing the rest of the world how it’s done.

INNOVATION IS KEY FOR department store survival

In recent years, advances in technology and e-commerce alongside changing consumer habits have meant that department stores have had to place innovation at the heart of their strategies to ensure survival. While many department stores still struggle to keep their head above water, leading US brand Nordstrom is a great example of how to stay ahead of the crowd while simultaneously creating intrigue and excitement.

Nordstrom’s two-phase entry into New York City has been dubbed ‘like shopping online – only in real life’ by GQ Magazine , thanks to its nimble and savvy approach to modern-day retail. The two separate spaces are men’s only and women’s only (the latter will not open until late 2019), which immediately makes a statement loud and clear: we are setting ourselves apart from anything that already exists.

By creating spaces that mix together everyday and designer brands, Nordstrom has identified the fact that, in reality, none of us wants to be dressed head-to-toe in designer labels. Instead we like to pick and mix products from different price ranges. Coupled with the store’s endless list of innovative services – think 24-hour pickup for items ordered online and super-fast returns – it is clear that Nordstrom has taken its physical, as well as digital, evolution incredibly seriously.

Moving to the other side of the world, Alibaba, which is the majority stakeholder in Chinese department store brand Intime, is also employing digital strategies,

technology and data to transform retail – offline as well as online. Intime, which has 62 stores in 33 cities in China, leads the charge among brick-and-mortar operators in what’s being called ‘new retail’ – a phrase which champions e-commerce as the foundation for everything the company does. Initiatives have included being the first department store to use Alipay and creating an Intime app (Miaojie) which gives the customer an in-store experience in a mobile format, keeping them connected to the physical store at all times.

For Intime, and many other department store chains, what remains the biggest challenge (and opportunity) is configuring the right mix of offline and online space to appeal to audiences of all ages and demographics. They are having to move away from being a traditional bricks-and-mortar operator to a technology-driven innovator.

Closer to home and it’s clear UK department stores are also successfully investing time and capital to stay ahead of the game. Most recently, Harrods has announced further retail expansion at its existing store in Knightsbridge and Selfridges on Oxford Street is undergoing a £300 million phased refurbishment.

With international tourist arrivals in London expected to hit 26.3 million by 2030, it is evident that London department stores need to continue building on existing success to keep up with international competition.

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South Korea’s influence, dubbed the “K-wave”, on fashion and lifestyle trends in China has been gathering pace for a number of years and with it the expansion of South Korean brands into the country. For example, skincare and makeup are among Korea’s most popular goods shipped to China. According to the Korea International Trade Association, Korean cosmetics exports totalled US$3.92 billion in 2017, quadrupling the US$1.05 billion reported in 2013, and with the bulk (37.4 per cent) going to mainland China.

BEYOND ASIA PACIFIC MARKETS

make the leap

A number of Western brands and private equity houses have either acquired or are backing Korean brands as a way to access the huge appeal of K-brands in China. L Catterton Asia (the private equity arm of LVMH) became a minority stakeholder in Korean cosmetics firm CLIO in 2016 and Gentle Monster in 2017, while Estee Lauder bought a 33.3 per cent stake in the parent company of Korean skincare brand Dr Jart+ in 2015.

While the expansion focus of Korean brands largely remains on the Chinese market, we are starting to see some brands look to new markets beyond Asia Pacific, typically starting with the US.

Gentle Monster, the South Korean eyewear brand, opened its first store outside Asia Pacific in New York in 2016, followed by LA the following year and its first European outpost in London in 2018. This year also saw the South Korean mobile character brand Line Friends open its first US store in New York’s Times Square as did fashion retailer Aland in

Brooklyn, New York. A number of South Korean beauty and cosmetics brands have also been expanding via store openings and popups in the US with Innisfree launching its first store outside the Asia Pacific region in New York in 2017.

To some extent the expansion into new international markets beyond Asia Pacific is about targeting Chinese consumers when they are abroad in order to reinforce the brand at home. But this is not just a marketing initiative for South Korean brands and is more about global revenue expansion and diversification beyond the Chinese market.

This is just the start of South Korean brands moving beyond their established Asia Pacific locations and we expect to see more make the leap, with North American markets likely to be their first port of call before heading into Europe.

KOREAN COSMETICS EXPORTS TOTALLED US$3.92 BILLION IN 2017.

THIS IS JUST THE START OF SOUTH KOREAN BRANDS MOVING BEYOND THEIR ESTABLISHED ASIA PACIFIC LOCATIONS.

SOUTH KOREAN RETAIL BRANDS

By Marie Hickey, Savills retail research director.

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In 2015 the then chief executive of John Lewis Andy Street remarked that investment in distribution warehousing and associated automation systems had helped the company’s strong performance through the busy Black Friday and Christmas trading seasons.

Online sales now account for 42 per cent of John Lewis’s turnover. The growth of online retailing in the UK generally has resulted in dramatic changes in the warehouse property market and an increasing recognition that fit-for-purpose retail supply chains provide a competitive edge in the modern retail environment.

The average amount of warehouse space transacted rose from 20.4 million ft per annum in 2012 to 28 million sq ft at the end of 2017 with online retailers playing a central part: Amazon alone accounted for 27 per cent of all of the new warehouse space transacted in 2016.

At the same time, however, the supply of warehouses has fallen dramatically. In 2009 almost 100 million sq ft of warehouse space was vacant. Today that figure is 28 million sq ft, reflecting a current vacancy rate of just 6 per cent. These supply-

and-demand dynamics have also meant that rents have risen by up to 40 per cent in five years in many of the markets in which Savills is active.

The reaction from logistics warehouse developers has been to put 10.3 million sq ft of warehouse space, across 48 separate schemes, under speculative construction, the highest amount in the UK since 2008. Crucially, this pipeline supply also contains units over 400,000 sq ft. In the last five years buildings of this size and above have almost always needed to be satisfied via a pre-let before construction could take place and in most cases under a longer lease term than demanded by landlords for speculatively built space.

In 2019, for the first time in nearly five years, occupiers of warehouse space will have a good supply of vacant buildings across the country of varying size ranges to satisfy their requirements. Retailers looking to optimise their supply chains or to trade up to more modern facilities may have a window of opportunity to secure cost-effective space by taking advantage of the amount of warehousing which will be vacant.

Retailers must move quickly to secure the warehouse space they need.By Sally Duggleby, Savills head of UK industrial & logistics occupier services.

READY, STEADY, GO!

IN 2019, FOR THE FIRST TIME IN NEARLY FIVE YEARS, OCCUPIERS OF WAREHOUSE SPACE WILL HAVE A GOOD SUPPLY OF VACANT BUILDINGS ACROSS THE UK.

S A V I L L S M A P I C M A T T E R SS A V I L L S M A P I C M A T T E R S

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EMEA

Larry BrennanHead of EuropeanRetail [email protected]+353 87 2617115

Laura Salisbury-JonesAssociate Director, Cross Border & CentralLondon Retail [email protected]+44 020 7409 8830

Carlotta MattejaCross Border SeniorKey Account [email protected]+49 69 2730 0028

UK

Anthony SelwynHead of London &International [email protected]+44 020 7758 3880

Sam FoyleDirector, UK &International [email protected]+44 020 7409 8171

INVESTMENT

Oli Fraser-LooenHead of Cross BorderRetail [email protected]+44 020 7409 8784

LEISURE

David BellHead of Cross Border& European [email protected]+44 020 7877 4516

Jordan KarpSavills Head of Canadian Retail Services

FIVE minutes WITH...

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1. What, for you, has stood out in the Canadian retail sector in 2018?

What has stood out for me is how much interest there was in Canada as a market for foreign based retailers to expand into, in particular as an entry point to North America.

2. Where in the world are Canadian retailers already established and where do you think they will the head to next?

The most notable Canadian retailers that have successfully expanded outside Canada include Canada Goose, Roots, Lululemon, and Artizia/Most Canadian retailers have gone south of the border into the USA. I think we will see them accelerate their expansion in Europe and Asia.

3. What is your favourite property in Canada?

My favorite retail property in Canada would be Yorkdale because it has the most world wide recognition. In 2018 they are likely going to break the $2 billion mark. My favorite mixed use property would be BCE Place in Toronto because of the unique architecture with the blending of historical and new construction.

4. What could have the biggest impact on the property sector in the next 10 years?

Soaring realty taxes, rising interest rates and the impact of trade wars.

5. How do you see technology affecting retail across the world?

Technology provides a more cost effective way for retailers to get their message out and deliver the speed and convenience consumers are looking for.

6. What do retailers need to be doing more of to keep up with consumers in 2019?

Listen to their customers and create brick and mortar experiences that excite people and make them want to go out and shop in person and not from their couches or desks.

7. Do you think the social commerce (i.e. purchasing through social media platforms) will continue to thrive?

Social media will continue to thrive and will drive or drive away customers. Retailers and landlord who are going to be successful will need to continuously use social media to stand out.

8. What is your opinion on AI and robotics in real estate?

Anything that can help mall owners and retailers better understand the buying patterns and trends of the customer is good. We do have to be mindful of big brother knowing to much about us. Only downside is they can compromise privacy.

ASIA PAC

Nick BradstreetManaging Director,Retail AgencyHong [email protected]+852 2842 4255

Joey ChioHead of Retail Tenant [email protected]+8621 6391 6688

Leighton HunzikerDirector, Retail [email protected]+61 282 158 838

NORTH AMERICA

Susan KurlandCo-Head Global Retail Services [email protected] +1 212 328 3953

Victoria OlivaManaging Director, Global Retail Services USA [email protected] +1 212 328 3946

Jordan KarpHead of Canadian [email protected]+1 416 922 2223

RESEARCH

Marie HickeyDirector, Retail [email protected]+44 020 3320 8288

9. If you could change one thing about the property sector, what would it be?

I would double the commissions landlords pay.

10. We have seen some mergers and acquisitions amongst Canadian retailers across Europe – is this a trend you see continuing?

Canadian retailers and landlords will continue to be strong players in the retail sector across Europe through mergers, acquisitions and licensing deals.

11. What would you do if you won the lottery?

That depends on how big the lottery winnings were. Suffice to say, my credit cards would be put to good use.

12. What is your favourite ice cream flavour?

Heavenly Hash.

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LE TUBE10 rue Florian Tel +33 (0) 4 93 68 51 69http://le-tube.com/en/

Located in a quiet street in the city center of Cannes, Le Tube is only few meters away from the famous Croisette.

The setting of the restaurant is unique because of its design inspired by the industrial New York style, and its concept which is based on dry aged beef.

The restaurant is perfect for every occasion from dinner meetings to private events.

The unique specialty is dry aged beef. The meat comes from all over the world and is rigorously selected by the chef and its team.

Tables near by the open kitchen are probably the best to appreciate the work of the chef and its culinary brigade.

THE UNIQUE SPECIALTY IS DRY AGED BEEF

We asked some of Savills regular MAPIC delegates to pick out a few of their favourite

restaurants in Cannes.

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The CBeach is perfectly located in the famous Croisette. What better way to enjoy the French Riviera way of life!

The restaurant is the best place to enjoy Mediterranean French food or to have a drink with a view on the Bay of Cannes and the Lerins Island.

Mediterranean food is the main specialty of the CBeach. Fish, southern vegetables, wines of Provence...

Wherever you sit…you will always have a breathtaking view of the sea.

The latest ‘in’ place to be and to be seen and only 5 minutes form the Palais and the Croisette, located in a little side street.

Specialties include their fabulous Wagyu Beef and US Angus Beef. The real treat is the Corsican red tuna Tataki with a caramelized onion and sesame sauce.

They have also created a unique ‘Cocktail & Raw Bar’ at the front of the restaurant where the chef prepares lots of raw delights (tartars ceviches and other) to accompany your cocktail.

45 boulevard de la CroisetteTel +33 (0) 4 93 38 14 59http://www.cannesbeach.eu

CBEACH THE VESUVIO CAFÉ

6 Impasse Florian Tel +33 (0) 4 93 38 60 95http://lamomecannes.com

LA MÔME

69 boulevard de la CroisetteTel +33 (0) 4 93 43 70 94

IN THIS PLACE THE QUALITY EQUALS THE PIZZAS IN NAPLES AND THE PASTA FROM ROME!

Located in the heart of Cannes, in between the major hotels and on the Croisette Boulevard, the Vesuvio Café is the perfect place for drinks and a terrific Italian meal.

The ambiance is the typical brasserie-style: friendly and cosy.

In this place the quality equals the pizzas in Naples and the pasta from Rome!

We especially recommend the Tomatoes with Burrata Mozzarella as starter to be followed by the Pizza Parma.

Finish your meal with a coffee ristretto accompanied by a succulent Italian desserts, like tiramisu.

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CASA DI NONNA41 Rue Hoche, 06400 Cannes, FranceTel +33 4 97 06 33 51

When you’ve had your fill of rich food and just need something homemade! Cassa Di Nonna serves up great salads, pasta dishes and more. Also good for breakfast.

Very small and cosy restaurant serving the best cuts of meat barbecued to perfection. Book in advance as tables are very limited. The Crudites basket is awe inspiring but don’t go if you don’t like meat as that is the main event!

15 Rue Saint-Antoine, 06400 Cannes, FranceTel: +33 4 93 39 62 21http://lemaschou.com

LE MASCHOU

CASSA DI NONNA SERVES UP GREAT SALADS, PASTA DISHES AND MORE

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Savills is one of the world’s largest real estate firms. Established in 1855, we now have over 35,000 employees in over 600 offices and associates in 60

countries throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. Through our advice, our property management capabilities and our transactional services, we help our clients to fulfil their real estate needs –

whatever and wherever they are.

Whilst we are a truly global brand, we believe that property starts with people. Our dedicated team can provide you with expert advice, constant support and

communication and, ultimately, peace of mind and great results.

*Gentle Monster, Argyll Street, London

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