If you are interested to know more about Redevco’s View on the Market attractiveness of cities, please contact Redevco. Redevco B.V. T +31 (0)20 599 62 62 | E [email protected] | www.redevco.com This Brochure is printed on TOP10 Green Gloss paper 100% post- consumer FSC Recycled fibre and PCF (Processed Chlorine Free) Amsterdam, September 2015 REDEVCO’S VIEW MARKET ATTRACTIVENESS OF CITIES WHERE TO INVEST IN RETAIL PROPERTY PROPERTY MARKET CITY QUALITY POPULATION ECONOMY Soft factors increasingly important for a city’s attractiveness At the start of this study Redevco hypothesised that the increasingly critical consumer attaches more and more value to the quality of the shopping environment, in addition to the shop offering. The most attractive shopping destinations are those which offer a pleasant atmosphere and where shopping can be combined with other opportunities such as dining out and cultural experiences. The City Attractiveness Model demonstrates that, in addition to the fundamentals like economy and demography, soft factors are indeed increasingly important in determining a city’s overall attractiveness for High Street investments. Factors like the presence of a relatively high share of creative professions, a high number of historical points of interest and a relatively young population significantly contribute to the explanatory power of the model. The research also shows that rental value growth and yield compression are strongest over time in those cities that score well on soft factors. ON THE BASIS OF WHAT ARE THE CITIES RANKED? Redevco’s View: Quality will continue to outperform Structural change in the retail land- scape is causing polarisation in terms of property performance. Our City Attractiveness Model contributes to our understanding of what drives performance in retail real estate investments and helps us to make the right investment decisions in a relatively opaque market. But it has also strengthened our belief that High Street retail in Europe’s most attractive cities will continue to out- perform as it combines all the things that the modern consumer is looking for. Escalating location risk… As a pan-European investment manager specialised in retail property, it is our business to identify those markets that contribute to the success of the retailer and that of our investors - and thus to our own success - now and in the future. Over the past years location selection has become even more important. Location risk has leapt up the agenda as, amongst other factors, e-commerce is changing the retail landscape at an astonishing speed. …Reinforcing the need for a navigation tool This volatile environment requires a well-substantiated view on the most attractive cities for our business. During the past three years, Redevco has carried out extensive research to develop its City Attractiveness Model. It now ranks more than 800 European cities in terms of attractiveness for High Street investments and is used to inform investment decisions and develop business strategies. Redevco’s Research & Strategy team has combined best-in-class data derived from 39 sources into 19 different and meaningful indicators with regard to various aspects of retail real estate. The indicators are grouped into four categories: population, economy, retail property market and city quality. These are weighted to calculate a city’s attractiveness score. This weighting is enriched with local knowledge of Redevco’s seven country teams that enables the locations to be grouped into five quality baskets ranging from ‘Excellent’ to ‘Poor’. Extensive scenario analysis and testing of the results has now resulted in a robust model, which is able to statistically explain nearly 70% of the variance in rent and yield levels between the cities included in the model. THE JOURNEY FROM A COLLECTION OF FACTS TOWARDS A WELL-SUBSTANTIATED VIEW THE NEED FOR A CITY ATTRACTIVENESS MODEL PROPERTY MARKET POPULATION CITY QUALITY ECONOMY Population Size Catchment Area Future Population Growth Employment Growth Disposible Income Volatility Retail Sales per Capita Retail Sales Growth Unemployment Yield Level Rental Level Deal Flow International Retailers Vacancy Development Pipeline Average Age Tourism Historical Points of Interest Creative Professions OUTCOME REDEVCO CITY ATTRACTIVENESS MODEL
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If you are interested to know more about Redevco’s View on the Market attractiveness of cities, please contact Redevco.