London’s prime retail pitches are continuing to attract international retailers despite demanding some of the highest rents and occupancy costs in Europe, according to research by Colliers International.
The report examined the total occupancy costs for retailers in key locations across Europe, including rent, local taxes and other costs. London emerged as by far the most expensive city, but because it also attracts the highest volume of spending by tourists, retailers are willing to pay a premium to be there.
“It is clear that retailers consider total occupancy costs relative to the actual and potential amount shoppers spend in a specific market,” said Paul Souber, head of retail agency at Colliers.
However, when other costs are factored in, the differential increases markedly. In total, retailers in London face an average bill of £4.3m, compared with £3.1m in Paris and just £1.5m in Berlin.
In percentage terms, rent makes up just 58% of the total costs retailers pay in London, compared with 78% in both Paris and Berlin.
The research found that retailers in London have proportionately the highest tax burden in Europe, with business rates alone accounting for up to 40% of total costs.
However, London was also the most visited city in 2015, generating a total spend by international tourists of more than $20bn (£15bn), compared with $16.6bn in Paris.
As a result, international retailers are willing to meet the high occupancy costs to secure a position in the market.
“When comparing competing locations, the property industry tends to look at rental levels, but retailers consider total occupancy cost – the true annual bill for setting up shop,” added Souber.
“In some markets, the percentage of total occupancy costs made up by these additional costs is startling, so it’s clear that retailers need to consider many factors before embarking on building a retail operation in a new market.”
Originally posted 2017-01-02 16:32:29.