France

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.).

Household consumption is one of the country’s main growth drivers with the French still devoting a high share of their disposable income to the retail sector. Despite a slight decrease of visitors in 2016 to nearly 83 million (85 million in 20015), France is recovering in 2017 and remains the most popular tourist destination in the world, attracting consumers from all over the globe, and spending a significant amount in France’s most sophisticated thoroughfares, such as Paris’ Golden Triangle, The Marais, or other key tourist locations in the country such as Cannes, Saint-Tropez or Courchevel, where some of the most iconic brands are located (many owned by a few dominant French luxury groups (LVMH, Kering, Hermès, etc.).

ECONOMIC SUMMARY
ECONOMIC INDICATORS*201220132014201520162017*
GDP growth 0.20.60.71.21.11.4
Consumer Spending -0.20.60.71.51.81.6
Manufacturing Production -0.30.1-0.12.40.21.5
Business Investment 0.9-0.82.93.13.63.7
Unemployment Rate (%) 9.49.99.910.19.99.9
Inflation 2.00.90.50.01.20.3
€$/USD (average)0.780.750.750.900.900.96
€$/USD (end-period)0.760.730.820.920.950.98
Interest Rates 3-month (%) 0.20.30.1-0.2-0.6-0.5
Interest Rates 10-year (%) 2.02.40.81.00.71.3

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

ECONOMIC BREAKDOWN
Population (Metropolitan France)67.2 million (2017)
GDPUS$ 2,482.3 billion (2016)
Public Sector Balance -4.0% of GDP (2014)
Public Sector Debt-3.3% of GDP (2016)
Current Account Balance-1.2% of GDP (2016)
Parliament Dominant coalition of the presidential majority (République en Marche) and centrist Party.
President Emmanuel Macron
Prime Minister Edouard Philippe
Election Date May 2017 (Presidential)
June 2017 (Legislative)
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
FRANCE201420152016E2017F2018F
Retail Volume2.33.82.82.71.7
Retail Value0.01.21.63.12.3

LARGEST CITIES (2013)
CITYPOPULATION
Paris11,959,807
Lyon2,237,676
Marseille/Aix-en-Provence1,734,277
Toulouse1,291,517
Bordeaux1,178,335
Lille1,175,828
Nice1,004,826
Nantes908,815
Strasbourg773,447
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Cushman & Wakefield Inc, France

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Paris: 48.856614, 2.352222
Marseille: 43.296482, 5.369780
Lyon: 45.764043, 4.835659
Toulouse: 43.604652, 1.444209
Nice: 43.696036, 7.265592
Nantes: 47.218371, -1.553621
Strasbourg: 48.583148, 7.747882
Montpellier: 43.610769, 3.876716
Bordeaux: 44.837789, -0.579180
Lille: 50.629250, 3.057256

Major Domestic Food Retailers

Carrefour, Auchan, Casino Group (Casino, Monoprix, Franprix, etc.), Cora, Système U, Leclerc, Intermarché.

Major International Food Retailers

Aldi, Lidl, Costco

Major Domestic non-Food Retailers

Fnac, Décathlon, Darty, But, Conforama, Vivarte Group (La Halle aux Chaussures, Kookaï, Caroll, etc.), Beaumanoir Group (Morgan, etc.), Leroy Merlin, Castorama, Galeries Lafayette, Printemps, Boulanger, Cultura, Bricomarché, Sephora, SMCP Group (Sandro, Maje, Claudie Pierlot), The Kooples, Jules, Camaïeu, 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, Sostrene Grene, etc.

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, Five Guys, etc.

TYPICAL HOURS
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 66 million (ranking second behind Germany and before UK) and with 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 of 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 the development of several new entrants to the market both in Paris and the provinces (e. g. Uniqlo in Bordeaux, Lille and Montpellier, or Primark in Toulon, Lille, or Evry 2. This two brands also open in new Val d’Europe’s extension).

Total existing stock of shopping centre space in France totaled near 21 million sq.m. as at 1 January 2017. The French landscape is dominated by several regional historical schemes in the Paris region (Les Quatre Temps, Belle Epine, Créteil Soleil, the new Forum des Halles and Vélizy 2) and within the provinces (La Part-Dieu in Lyon, Grand Littoral in Marseille, Cap 3000 near Nice and Euralille in Lille). Despite a decline in the number of new regional Shopping centre openings, some significant projects recently opened in the South part of France : Ametzondo in Bayonne (76,000 sq.m) and Avenue 83 in La Valette du Var (51,000 sq.m) in 2016 and Polygone Riviera in Cagnes sur Mer (44,000 sq.m) in 2015. The activity is now mainly focused on redevelopments and extensions with some emblematic extensions for 2017 in the Greater Paris area: Val d’Europe and Carré Sénart. 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 retailers implementing concepts in megastores (Primark, Mango, Uniqlo, and Apple).

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 10 years with the development of a new generation schemes, more family friendly and with a broader and more balanced tenant mix. One of the most visible example of this approach is Atoll in Angers, Waves Actisud (2014), near Metz, or Ma Petite Madelaine in Tours (2016), which places several relatively high-end brands that were largely or completely absent from peripheral zones in a sophisticated architectural concept.

France is one of Europe’s chief markets for factory-outlet centres, with about 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 new projects in the provinces, like the recent opening in 2017 of the 3rd French McArthurglen scheme in Miramas in southern France. Tourism is identified as an unavoidable motor generating potential turnover to factory outlets.

With 72 billion Euros spent in 2016, 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 an omnichannel network. New technologies are now used by nearly all retailers and have become part of the typical consumer shopping journey or user experience. Every new shopping centre and retail park includes new digital concepts and are “Connected” providing the best services to the customers.

There are no restrictions on foreign companies either buying or renting property in France.

The French retail property market is generally considered as one of the most transparent and mature in Europe. Sundays opening in specific zones defined as International Tourist Zones is now established by the Macron law, taking advantage of the tourist high purchasing power, mainly in Paris (12 zones). The trend of the policy of new Macron’s government aims to liberalize the economy and boost growth. The role played by public authorities and legal recourse on retail schemes remain important. This may occasionally impact the length of time it takes to open stores and retail schemes.


TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE
(GLA SQM)
YEAR
OPENED
BELLE EPINE Thiais (Paris region)141,0001971
LES QUATRE TEMPS Puteaux/La Défense (Paris region) 140,0001981
LA PART-DIEU Lyon 127,0001975
CRETEIL SOLEIL Créteil (Paris region) 124,0001974
VAL D'EUROPE (after 2017 extention)Serris 115,4002000
CARRE SENART (after 2017 extention) Lieusaint113,0002002
ROSNY 2 Rosny-sous-Bois (Paris region)111,0001973
GRAND LITTORALMarseille110,0001996
PARLY 2Le Chesnay (Paris region)107,0001969
VELIZY 2Vélizy-Villacoublay (Paris region)104,0001972

New Entrants to the Market

Five GuysSeasideDeichmanBirchboxWagamama
Sostrene GreneHerschelNyxKruidvatHarmont & Blaine

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease Terms10 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 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. Possibility to set up derogation with short term leases (max 3 years).
Rental PaymentEuro 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 MoneyKey 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 ReviewAnnual. 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. Only old contracts have rents 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 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 LeaseAssignment 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 MethodsShops are valued on a “zoning” basis (following the 2015 MGP: Méthode Générale de Pondération). 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.
LegislationDecree 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. 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.


France Contacts

CHRISTIAN DUBOIS

Head of Retail Services France
Cushman and Wakefield LLP
Etoile Saint Honore
21 rue Balzac
75008 Paris
Tel: +33 01 53 76 92 96
Mob: +33 06 71 01 43 01