The shopping centre market - France

1.2 The global market dominated by Asia

Overview

AT Kearney's study on the future of shopping centres provides an initial overview of the current global market. It is noted that the market growth is positive in all regions of the world, but that it is largely driven by the Asia-Pacific region with a *% increase in the number of new shopping centres and an even greater *.*% increase in useful retail space between **** and ****.

Today, the largest shopping centres in the world are located in Asia. In particular, the "New South China Mall" in Dongguan (***). It is only in *th place we find a non-Asian mall, namely West Edmonton Mall in Canada. Indeed, Asia dominates this list with * out of ** of the largest centres.

The role of shopping centres is to change

The global structure of shopping centres and the demand for services will change going forward. In particular, millennials will drive this shift of consumption, as depicted in the graph above. In particular, experiences is the segment which will increase the most; this includes gaming halls, cinemas, bowling alleys etc. Products on the other hand will loose market share measured through revenues, due to the rise of e-commerce.

Expenditure distribution in global shopping centres World, ****-****, in % of expenditures ...

1.3 France's position in Europe is robust

In Europe, the United Kingdom dominates the number of shopping centres; in **** the country had almost *** more than France which was in second plance. 

Moreover, from the graph below we can confirm that there is a vast amount of shopping centres in France. The fact that the UK, France and Italy are in the top can be explained by the fact that these countries also attract the most tourists of all countries in Europe, and shopping centres often attract additional customers in the form of tourists. Other growth drivers of shopping centres include consumer spending power and population size. 

Number of shopping centres in Europe, by country Europe, ****, in units Source: ****

However, France places **th in Europe for commercial density (***), as depicted in the graph below. 

Shopping centre density in Europe, by country Europe, ****, in GLA m*/**** people Source: Cushman & Wakenfield  

1.4 French revenue is declining but investment remains strong

Overview

In France there were *** shopping centres in ****. Together, these made up ** million m* and €*** billion in revenue, and together they accounted for ***,*** employees and **,*** stores (***). Another *** projects are currently under way in France and are set to be ready by ****. [***]

Moreover, **% of shopping centres are branches and **% are held by franchisees or independents, and represents ***,*** direct jobs and **,*** indirect jobs. [***]

Market size declining 

Market size shopping centres France, ****-****, in € billion Source: ****

The graph above shows how the market size (***) which is shown in the following graphs. 

The market size is calculated throuh using ****'s market size (***) as reference value, whereby we use the market size evolution between **** and **** to obtain revenue for each year through discounting. 

Shopping centres and their stores are expanding in numbers

Evolution of number of shopping centres France, ****-****, in units Source: ****

The CNCC reports that the number of shopping centres in France increased by *** (***) between **** and ****. In **** France had *** shopping centres.

Moreover, as can be seen below, the number of shops have also grown in parallel to the expansion in the number of shopping centres. In **** there were on average ** shops/shopping centre, in **** this figure was equivalent to **. The number of shops in ...

2.1 Focus: the French consumer & shopping centres

Attendance

In ****, French shopping centres hosted *.* billion visits. [***]

A study by the Hammerson real estate showed the importance of shopping centres in the habits of the French people. Indeed, Almost one in two French people (***). [***]

Most popular shopping centres & stores

Below is an overview of the most visited shopping centres in France in ****. 

Ranking of most visited shopping centers France, ****, in annual visitors (***) Source: ****

Les Quatre Temps, at La Défense near Paris, is the centre with the most visitors, with ** million visitors in ****. In second place that year we find La Part-Dieu in Lyon with **.* million visitors, followed by the Forum des Halles in Paris (***). [***]

In terms of which stores in particular consumers look for, the graph below presents a survey from **** with the most popular stores based on the customer experience. Kiabi is in first place (***) closely followed by Décathlon and Boulanger. This metric is important to consider as chances are that shopping centres with these stores will attract more consumers.

Top ** stores in shopping centres based on customer experience France, ****, in % Source: ****

Consumer preferences and behaviour

Finally, below the distribution of revenue in shopping centres per product and service category is depicted.

From this we find that ...

2.2 COVID-19's impact on the industry

Procos reports that sales for shopping centres dropped by **% between April **** and April **** (***). Between January and April ****, and the equivalent period in ****, sales declined by **%. Meanwhile, E-commerce demonstrated a **% increase.  

Emmanuel Le Roch, General Delegate of Procos, states that rents will be the largest and most significant cost to consider for shopping centres going forward. In most cases, these have not been revised sufficiently, parallel to a significant decrease in the cash flows of shopping centres, which has put a large financial burden on real estate owners.

Short-term investment in shopping centres has also suffered in light of COVID-**; in **** around **% of all investment in France in asset classes tied to retail (***) were in shopping centres, but in Q* **** the equivalent figure was *%. [***]

Google trends, shopping centres France, January ****-August ****, in units Source: ****

The graph above represents the proportion of searches for a given term in a given region during a specified amount of time, compared to when it was the most searched (***). Thus, a value of ** means that the keyword has been used less often in the region concerned, and a value of * means that there is insufficient data for this keyword. The search interest for shopping centres in France ...

3.1 An overview of shopping centres in France

A shopping centre's lifespan is around ** years. [***]

On top of this, Le Figaro claims that in **** **% of shopping centre surfaces (***) were located in the periphery of larger cities. Projects in the city centre, on the other hand, are in continuous decline and represent a mere *% of the surface area planned. 

Shopping centres in France can be divided into four broader categories: 

Source: ****

Type of shopping centres in France

Total units of shopping centre, by type France, ****, in units Source: ****

Indeed, smaller shopping centres (***) dominate the number of stores in France. In ****, they accounted for close to half of all shopping centres. Large shopping centres also prevail. 

Distribution of stores for shopping centres France, ****, in % Source: ****

Finally, the majority of stores (***). Efficiency is thus not maximized. 

3.2 Distribution & revenue of shopping centres in France

Revenue is in a decreasing trend

Revenue of shopping centres France, ****-***** (***), in % Source: ****

Overall, revenue for shopping centres in France is down, as shown in the graph above. Compared to ****, revenue has decreased every year, and in **** the index value was **.*. This implies a decrease in revenue of *.*% (***).

In particular, La Part-Dieu shopping centre in Lyon had the highest revenue in **** (***). [***]

The revenue distribution per product is presented below.

  Revenue distribution, by product France, ****, in % Source: CNCC  

As illustrated by the chart, personal equipment accounts for the largest proportion of revenue (***). This implies that many consumers indeed vists shopping centres to buy clothing and other personal equipment. In second place we find culture, gifts and leisure which is a more niched segment but still accounts for **% of sales. Food and restauration is a complementary service to shopping centres; indeed, consumers often buy food in relation to their shopping rather than actively visiting restaurants in shopping centres. Finally, entertainment only accounts for *% of total revenue. However, as we saw in section *.* this category will most likely increase going forward.

Geographical distribution

The CNCC supplies an interactive map with shopping centres and projects. From this it is clear that shopping centre ...

3.3 Nationality of investors and investment outlook

Investors account for a significant portion of the demand as they provide capital to build new shopping centers and renovate existing ones. We present below the most common investors in shopping centers in France, by nationality.

Volumes invested by buyer's nationality France, ****, in % Source: ****

Indeed, shopping centers require heavy initial investments and significant capital expenditures. As a result, and this is the case in France, foreign interests often play a role in the construction and maintenance of shopping centers. In ****, approximately two-thirds (***) investors accounted for * out of **. **% of the transactions measured in volume came from investment funds. Major purchases include AXA Reim's purchase at Passage du Havre for *** million euros, or BNP's purchase of ** Haussmann (***) for *** million euros. Investment outlook Downtown stores have been the subject of the largest expansions recently; in fact, their share of investments has increased from **% to **% over the last three years LSA reports that "downtown stores clearly confirm their hegemony with more than *.* billion euros committed in ****, their highest level in ** years". This phenomenon is explained by three major transactions that took place in ****, exceeding *** million euros. This represents more than a quarter of the total volumes invested in ****. The same report states that "This widespread ...

3.4 E-McDonald's dominates presence

In particular, McDonald's is the most common store in French shopping centres; in ****, there were *,*** stores located in shopping centres. 

In second place we find Crédit Agricole (***). Overall, banks prevails in terms of presence measured through number of stores.

Ten most common stores in shopping centres France, ****, in units Source: ****

3.5 E-commerce: a threat to the status quo?

Revenue for e-commerce France, ****-****, in € billion Source: ****

The E-commerce sector is growing rapidly in France as we can see in the graph above; in **** e-commerce revenue was equal to €**.* billion whilst in **** this figure had increased to €**.* billion (***). This can be viewed as a threat to shopping centres which relies on physical contact and points of sale.

However, Le Capital states that certain shopping centres, such as Décathlon, still exist and maintain their stronghold due the proffessionality of the sales personnel. Moreover, the product offering is broad. These are aspects which consumers value highly and which can be a deciding factor for why consumers choose phyiscal stores. 

Moreover, **% of individuals in a survey from **** revealed that they actually view chores as something positive.

E-commerce is currently not cannibalizing on shopping centre sales proven by the fact that shopping centres are being renovated which shows that investors are ready to inject more capital and invest long term in the concept of a shopping centre.

Nevertheless competition is becoming more fierce. As a result, real estate investors are increasingly turning to warehouses and segmentation is taking place: very large shopping centres are holding up well and remaining attractive, but small shopping ...

4.1 Diversification is key in today's shopping centres

This section defines a shopping centre and looks at what is required in order to ignite success. 

Defintion based on size

Super-regional shopping centres: Useful commercial area greater than **,*** m* and/or at least *** stores and services. Regional shopping centres:  Useful commercial area greater than **,*** m* and/or at least ** stores and services. Large shopping centres:  Useful commercial area greater than **,*** m* and/or at least ** stores and services. Small shopping centres:  Useful commercial area greater than *,*** m* and/or at least ** stores and services. Theme centres:  Shopping centres specialising in a specific field.

Defintion based on location

Peripheral commerces are outlets in suburban areas of agglomerations. These include theme centres, retail parks, medium sized specialised stand alone stores or medium sized food stores. Peripheral trade is opposed to city centre trade. Retail parks are defined as an open-air shopping complex, built and managed as a unit. It comprises at least * rental units and its surface area is greater than *,*** m².

[***]

Shopping centres do not only fight against alternative retail stores, but also against each other. In light of this, "retail parks" have sprung up.

Included here is for example The Village, a high-end outlet brand park located ** minutes from ...

4.2 Cost analysis

Cost distribution of a shopping centre France, in % Source: ****

It is difficult to estimate a universal cost distribution for shopping centres as costs depend on rent agreements, investor ROI requirements, fees to tertiary partners etc. However, the graph above depicts a proxy for the distribution of costs. Here, one aspect (***) are also significant, followed by fees to external stakeholders.

Finally, according to Dynamic, the average price per square meter in a shopping centre is ****€HT/m* in the Paris region and ****€HT/m* in the provinces. The rent for a **m* shop located in a shopping centre in the provinces is therefore about €**** per month (***).

4.3 The largest shopping centres in France by capacity

Largest shopping centres in France, by number of outlets France, ****, in units Source: ****

In ****, La Part-Dieu was the largest shopping centre in France measured through number of stores (***). 

The conclusion we can draw from the graph above, and as we have stated before, is that the largest shopping centres in France are located in the periphery of the largest cities.

4.4 Improvements to shopping centres going forward

The graphs presented in this section provides a credible hint of where consumers place value in shopping centres, but also which aspects are subject to the most drastic changes.  In ** years, what will change the most/evolve for the stores? France and Europe, ****, in % Source: L'Observatoire Cetelem   From this we find that payments is something which will be revolutionised in France, given by the fact that **% of respondents believe this aspect will change. This is related to the rise in digitalisation and the shift to digital payments in store. Many shops (***) have even abolished physical points of payment through self-payment centrals.  Product delivery and advertisement are also points to consider when it comes to changes in the future. The former is impacted by home delivery, whilst the latter also involves digitalisation and sales via e-commerce.

Generally speaking, in winter, are you hot or cold in shopping centres? France, ****, in France Source: ****

One feature which must change in French shopping centres going forward is the temperature; according to a poll from **** **% of respondents were dissatisfied with the temperature. In other words consumers believe it is too cold or hot. Shopping centres can leverage on this discontent and try to adjust temperatures for ...

4.5 Location matters

Source: ****

Finally, the table above applies for shopping centre investors who want to establish (***) a complex in the most frequented streets of France's largest cities. We find that Paris is by far the most expensive, followed by Lyon and Bordeaux. 

These prices play a large part in why shopping centres are situated in the periphery; as we saw in section *.* on costs, rent makes up the most significant expenditure, and urban locations often offer attractive rents. 

5.1 Legislative framework and urban planning

The decree of ** June **** of General de Gaulle prohibited the refusal of manufacturers to sell to distributors, which launched the expansion of mass distribution

Commercial urban planning can be seen as an instrument to regulate the expansion of shopping centres:

The law of * December **** on the orientation of trade and crafts, known as the Royer Law, is the first to introduce a specific regime for commercial urban planning. It responds to the growth of mass distribution in the ****s with an obligation to obtain a permit to set up or expand shops of more than **** m* in municipalities with fewer than **,*** inhabitants and **** m* in municipalities with more than **,*** inhabitants

The law on the development and promotion of trade and crafts of * July ****, known as the Raffarin Law further tightens the Royer Act by lowering the examination threshold to *** m*.

However, this constraint movement ended in **** when the law on the modernisation of the economy (***) raised the examination threshold to **** m* for municipalities with more than **,*** inhabitants, in particular to facilitate the installation of hard discount signs. Trade then becomes a support for purchasing power. [***]

6.1 Segmentation

• Unibail-Rodamco-Westfield
• Klépierre Groupe
• Westfield Les quatre temps
• La Part Dieu (Unibail Espace expansion)
• Marques Avenue
• SCC
• Sopic
• Compagnie de Phalsbourg
• Frey
• Groupama Immobilier
• Mercialys
• Franprix (Groupe Casino)
• Scaprim
• Socri
• Icade
• Foncière Euris
• Redevco
• Kléber Retail Real Estate
• CEETRUS Auchan