France is one of Europe’s largest retail markets, achieving an annual turnover of almost €500 billion, and is home to many renowned retail brands including some of the largest retail chains in the world such as Carrefour, Casino or the Mulliez group (e.g. Auchan, Décathlon, etc.).
Despite the economic downturn, household consumption remains one of the country’s main growth drivers with the French still devoting a high share of their disposable income to the retail sector. With nearly 85 million visitors in 2014, France is the most popular tourist destination in the world, attracting consumers from all over the globe, spending a significant amount in France’s most sophisticated thoroughfares. A concrete illustration of French famous ‘Art de Vivre’, Paris’ Golden Triangle of other key tourist locations such as Cannes, Saint-Tropez or Courchevel display some of the most iconic brands, of which a significant proportion are owned by a few dominant French luxury groups (LVMH, Kering).
|Unemployment rate (%)||9.4||9.9||9.8||9.9||9.6|
|Interest rates 3-month (%)||0.2||0.3||0.1||0.0**||0.0***|
|Interest rates 10-year (%)||2.0||2.4||0.8||0.5**||0.8***|
NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast **end of July 2015 ***end of April 2016
Source: Oxford Economics Ltd. and Consensus Economics Inc
|Population (Metropolitan France)||66.1 million (2014)|
|GDP||US$ 2,847.4 billion (2014)|
|Public sector balance||-4.0% of GDP (2014)|
|Public sector debt||95.0% of GDP (2014)|
|Current account balance||-1.1% of GDP (2014)|
|Parliament||Coalition of the Socialist Party, the Greens and the Radical Party of the Left.|
|Prime Minister||Manuel Valls|
|Election date||2017 (Presidential) June 2017 (Legislative)|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
|LARGEST CITIES (2012)|
Major Domestic Food Retailers
Carrefour, Auchan, Casino Group (Casino, Monoprix, Franprix, etc.), Cora, Système U, Leclerc, Intermarché.
Major International Food Retailers
Major Domestic non-Food Retailers
Fnac, Décathlon, Darty, But, Conforama, Vivarte Group (La Halle aux Chaussures, etc.), Beaumanoir Group (Morgan, etc.), Sephora, Leroy Merlin, Castorama, Galeries Lafayette, Printemps, Boulanger, Cultura, Bricomarché, Sephora, SMCP Group (Sandro, Maje, Claudie Pierlot), The Kooples, Jules, etc.
International Retailers in France (a selection)
Ikea, H&M (H&M, H&M Home, Cos, & Other Stories, etc.), Inditex Group (Zara, Bershka, Pull & Bear, Massimo Dutti, etc.), Gap, Benetton, Mango, New Look, Primark, Desigual, Kiko, Uniqlo, Hollister
Food & Beverage Operators
McDonald’s, Quick, Starbucks Coffee, Subway, Picard, Nicolas, Le Duff group (Del Arte, Brioche Dorée, etc.), Flo Group (Hippopotamus, Bistrot Romain), Burger King, M&S Food, Mezzo di Pasta, Paul, Pomme de Pain, etc.
|MONDAY - SATURDAY||SUNDAY|
|9.00/10.00 - 19.00/20.00 (later for supermarkets)||10.00/13.00 (supermarkets) (later in tourist areas)|
France is one of Europe’s largest retail markets, with a population of some 63 million (ranking second behind Germany) and sustained demographic growth. The French retail property market also benefits from a massive influx of tourists and from the fact that several giants in the retail distribution sector (food and luxury in particular) are French.
French retail property stock comprises over 200,000 shops for a total surface area of over 70 million sq.m. High streets account for the highest numbers of stores and retail parks accommodate nearly half the total surface area of organised retail space in France.
Limited by the shortage of real estate and the technical and administrative difficulties posed by town-planning laws, opportunities remain scarce on the top parts of high streets, recently boosted by retailers’ demand in the luxury sector and several new entrants to the market both in Paris and the provinces (e. g. Forever 21 on rue de Rivoli in Paris or Primark on rue Alsace-Lorraine in Toulouse).
Total existing stock of shopping centre space in France totalled over 20 million sq.m. as at 1 January 2015. The French landscape is dominated by several regional schemes in the Paris region (Les Quatre Temps, Créteil Soleil, Le Forum des Halles or Vélizy 2) and the provinces (La Part-Dieu in Lyon, Grand Littoral in Marseille or Cap 3000 near Nice). However, the number of new regional Shopping centre projects has declined considerably with activity now firmly focused on redevelopments and extensions. In addition to creations from scratch, several expansion projects for a few of France’s best-known regional shopping centers will indeed, as from 2016, feature outsized footprints (Forum des Halles, Cap 3000, Carré Sénart, Val d’Europe, etc.). The largest property-investment companies are focusing on these types of assets, which also appeal to many retailers aiming for maximum visibility to customers. This is particularly true of newcomers (Primark) and traditional retailers implementing new concepts in megastores (Mango, Uniqlo).
The French retail warehouse market is regarded as one of the most mature and highly developed in Europe. The fragmented and generally “mediocre” quality of much of the French out-of-town market still leaves a considerable gap for the development of higher quality and more integrated schemes and this process has now been underway for the last 8 years with more family friendly schemes and a broader and more balanced tenant mix. One of the most visible example of this approach is Waves Actisud, a new shopping center near Metz, which places several relatively high-end brands that were largely or completely absent from peripheral zones. Furthermore, renewal of deteriorated city outskirts will be increasingly common, such as Ode à la Mer, undertaken by Frey in Montpellier (after Be Green in Saint-Parres-aux-Tertres, open since 2013).
France is one of Europe’s chief markets for factory-outlet centres, with 450,000 sq.m., most of them are located in the north of the country and developed from the mid-1980s to the late 1990s. Trends toward an improvement in supply and in the architecture of factory outlets are obvious, as shown with the ongoing conversion of “traditional” shopping centres to the factory-outlet format and a flurry of projects in the provinces. In addition to the extension and redevelopment of existing centres, there are indeed many new schemes under way in southern and western France and border areas, in regions with considerable potential in terms of demographics and tourism.
With 57 billion Euros spent in 2014, Internet sales increased by 11% year on year. As consumers have become more comfortable with internet shopping and aware of the progress that has been made in services (delivery options, product return, secure payment, etc.), e-commerce is flourishing. But the penetration rate of new technologies in the retail sector is measured not only by growth of online sales. While the sale of innovative objects and associated products is largely carried out online, consumer demand has also created new retailers offering a more or less complete retail network (e.g. The Kase) and forced established retailers like FNAC to expand their offer. New technologies are now used by nearly all retailers and have become part of the typical consumer shopping experience. “Connected” shopping centers, such as Qwartz, opened in Villeneuve-la-Garenne in 2014, are emblematic of these new digital concepts developed in various retail sectors.
There are no restrictions on foreign companies either buying or renting property in France.
Parliament’s definitive adoption of the Macron Law in early July 2015 increases the number of Sunday openings allowed by municipalities from 5 to 12 per year. The other significant change is the possibility given to retailers located in “international tourist zones” (ITZ) to open on Sundays and every night until midnight. The law will affect several Paris neighborhoods, as well as the towns of Deauville, Cannes, and Nice. In addition, “Sunday rest” may now be interrupted (though not up to midnight) for the major train stations in Paris and six stations elsewhere in France (Lyon Part-Dieu, Marseille Saint-Charles, Bordeaux Saint-Jean, Montpellier Saint-Roch, Nice-Ville, and Avignon TGV).
|TOP SHOPPING CENTERS BY SIZE|
|NAME||CITY||SIZE (GLA SQM)||YEAR OPENED|
|BELLE EPINE||Thiais (Paris region)||141,000||1971|
|LES QUATRE TEMPS||Puteaux/La Défense (Paris region)||140,000||1981|
|CRETEIL SOLEIL||Créteil (Paris region)||124,000||1974|
|ROSNY 2||Rosny-sous-Bois (Paris region)||111,000||1973|
|PARLY 2||Le Chesnay (Paris region)||107,000||1969|
|VELIZY 2||Vélizy-Villacoublay (Paris region)||104,000||1972|
|EVRY 2||Evry (Paris region)||98,000||1975|
|O’PARINOR||Aulnay-sous-Bois (Paris region)||90,000||1974|
New Entrants to the Market
|Pittarosso||Primark||Tory Burch||Burger King||Rituals|
|KEY FEATURES OF LEASE|
|Lease Terms||10 or 12 years for retail (shopping centre or new schemes in high streets or retail parks), 9 years for existing retail units. The tenant has the right to break every 3 or 6 years, except when a fixed term has been agreed, in compliance with the new Pinel law (see below). The tenant has a statutory right to renew the lease for another 9 years. However the landlord can refuse to renew, but will have to pay high eviction indemnities. The landlord can also regain possession if the tenant breaches the covenant or for redevelopment, although the latter also involves high eviction indemnities|
|Rental Payment||Euro per square metre per year, and Zone A Euro per sqm per year for high street retail properties. Rents are typically payable quarterly in advance. Turnover rents are common in shopping centres. Exists also for retail parks and high streets (new schemes). Premium or key money payments are also common in France so as to gain leasehold interest, based on the tenants’ security of tenure and the limitation on rental increases.|
|Key Money||Key money is a lump sum payable to the outgoing tenant (the leasehold price). It is a non amortizable asset the value of which varies according to market conditions and usually equivalent to 10X the passing rent (difference between the actual rent and the Estimated rental Value). It is subject to registration fees payable to Tax authorities (5% with a €23,000 amount exemption. Ex.: Key-Money €123,000 the 5% is applied to €100.000 ) and non recoverable.|
|Rent Review||Annual. Rents are mostly indexed to the ILC index/ “Index des Loyers Commerciaux” (a weighted average index comprising changes in consumer prices, construction costs and retail sales), published by the INSEE (National Institute for Economic Statistics) quarterly but applied annually. Rents are less and less indexed to the construction cost index (ICC).|
|Service Charges, Repairs and Insurance||Service charge usually provided by the landlord is paid by the tenant according to the lease terms/in compliance with the new Pinel Law. It includes cleaning, security, maintenance, repair, etc. Insurance for common parts is also paid by the landlord and charged back. The tenant has to keep the premises in good repair. The tenant pays for internal insurance directly. While tenant associations in shopping centres are usually responsible for promotions and marketing, they can also be provided by the landlord who charged promotions and marketing back.|
|Property Taxes and other costs||Local property tax is generally paid for by the landlord, but this liability can be transferred to the tenant.|
|Disposal of a Lease||Assignment is not generally permitted without the landlord’s consent. The landlord will negotiate a higher rent if a change of use is required. The assignor must guarantee the rent until the end of the lease.|
|Valuation Methods||Shops are valued on a “zoning” basis. The retail zoning principle recognises that the area at the front of the shop, adjacent to its primary window frontage (normally referred to as “Zone A”) is the most valuable in rental terms.|
|Legislation||Decree no. 53-960, dated 30 September 1953, relating to commercial, industrial and small business premises, codified under Articles L145-1 et seq and Articles R145-1 et seq of the French Commercial Code. These provisions specify the particular conditions which are applicable to commercial leases and supplement the generally applicable provisions of the French Civil Code. New Pinel Law on retail and small businesses, has been adopted the 5 June 2014 including changes related to retail lease contracts; rent increases capped at 10%, priority granted to the leaseholder in case the premises is put on sale, extension of short term leases duration, etc.|
CHRISTIAN DUBOISPartner, Retail Services France
Cushman and Wakefield LLP
Etoile Saint Honore
21 rue Balzac
Tel: +33 01 53 76 92 96
Mob: +33 06 71 01 43 01