Retail property market France | Q1 2016

A Cushman & Wakefield Research Publication
RETAIL PROPERTY
MARKET
France
Q1 2016

French Retail Property Market | 2
ECONOMIC ENVIRONMENT
The year 2016 began on a positive note. After gaining 1.0% in
January, household consumption rose another 0.6% in February.
Growth of household consumption in the first quarter is expected
to total 0.8%, with 0.4% forecast for the second quarter. Stronger
French purchasing power explains some of this trend. The level of
GDP growth forecast for 2016—between 1.2% and 1.5%—will not
suffice to jumpstart the job market. However, with wages up
slightly and inflation capped by lower energy prices, consumer
spending is expected to rise.
Changes in household consumption since the beginning of the
year seem all the more positive now that several sectors are
moving full steam ahead. The furniture market hasn’t begun a
year like this since 2011,¹ and household goods in general are
trending upwards. The clothing sector, which was hurt during the
winter sales by unseasonably warm weather, is back on track.
Hotels and restaurants are beginning to stabilize after the severe
slowdown following the terrorist attacks in November 2015.
Nevertheless, nothing suggests that tourism could soon return to
pre-November levels, despite the windfall of the Euro 2016
football tournament held in France in June and July.
In addition to costing 0.1 points of French GDP in 2015, the rising
terrorist threat played a large role in the sapping of household
confidence in February and March, and could undermine French
consumption for the rest of the year. Moreover, the attacks in
Brussels on March 22, 2016, served to heighten the collective
sense of insecurity and will do nothing to boost tourism. This is
especially the case in Paris, where tourism at the end of 2015 was
already weakened. As a result, the number of foreign tourists has
fallen sharply since November 2015, and the Paris hotel industry
has been hit very hard. Although the number of overnight stays in
Paris hotels declined only a moderate 3% in 2015,² data for
January and February 2016 indicates declines of between 7.3%
and 12.9% year on year, depending on the market segment
(luxury, midrange, economy, etc.).³
¹Source: IPEA, Economic Report, February 2016.
²Source: Paris Tourism Office, Newsletter, March 2016.
³Source: In Extenso, Hotel Performances in France, February 2016.
Economic indicators (%)
2015E 2016F
GDP growth 1.1 1.3
Consumer prices 0.0 1.0
Unemployment rate¹ 10.0 9.9
Household consumption 1.4 1.1
Source: INSEE / Banque de France / E: estimate / F: forecast
¹Metropolitan France. Figures for 2016 are for the end of the first half.
RETAIL PROPERTY MARKET
France | Q1 2016
15,27
15,41
15,04
14,41
15,18
15,64
15,71
15,65
15,47
15,23
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Hotel arrivals in Paris (millions)
Source: Paris Tourism Office and INSEE.

THE LETTINGS MARKET
General trends
Numerous deals were completed in the French retail market in
the first quarter of 2016. Acquisitions and investments made more
or less recently help to explain the accelerated rollout of several
retailers (Ba&sh, IKKS, etc.). Although the influx of new foreign
retailers seems to be on hold, several recent arrivals continue to
build up their networks (Tiger, Burger King, etc.). Some retailers
are adapting their formats to better meet the demands of specific
market segments (e.g., Hema, whose most recent projects include
the Rivétoile shopping center in Strasbourg, and the rue de Rivoli
and the Gare du Nord in Paris). Another example is Kusmi Tea,
which has just opened in the Italie Deux shopping center in Paris,
in the Nailloux Outlet Village near Toulouse, and at 13 rue
Esquermoise in Lille.
More-established retailers are also launching new development
projects, often in the form of larger sales points (e.g., Intersport
and Gemo, on the outskirts) or new flagships of the fast-fashion
giants. By significantly increasing the size of their sales points,
retailers can also expand their product offerings. This trend is
visible in shopping centers (Zara in L’Espace Nayel in Lorient),
and also common in high streets. For example, the CDAC
(Departmental Retail Development Commission) recently
authorized H&M to expand its store at 1−3 rue Lafayette in Paris
by 3,000 m². However, as the Swedish group continues to grow
worldwide, it does not hesitate to close stores in France in order
to reduce the costs of its vast network.
In order to focus on the most profitable, largest, and best-located
stores, retailers have tended to ramp up arbitrages and to
reposition existing stores. Because of the maturity of the French
market and the growing interaction between traditional retailing
and online sales, most retailers are in a consolidation phase rather
than an expansionary one. While remaining focused on improving
the productivity of their sales points, retailers also take advantage
of arbitrages to adapt their network to the latest consumer
trends. Beaumanoir provides one of the most recent and high-
profile examples of such streamlining. The group aims to reduce
the number of stores in order to develop multistores on the
periphery and in shopping centers (new VIB’s concept).
France | Q1 2016
2010 2015
2,300 m² 3,200 m²
1,500 m² 2,400 m²
Average size of H&M and Zara flagship stores in
Unibail-Rodamco shopping centers
Source: Unibail-Rodamco, 2015 annual results.
We’re no longer aiming to be in small
cities, but rather in areas near small
cities, with a store that combines
several retailers.
Jean-Louis Mochamps, Beaumanoir Group, head of affiliation and development, Le Journal
du Textile, February 23, 2016.

Average amount and number of transactions for sales
of retail businesses in France
THE LETTINGS MARKET
Closings and openings by retailers are usually carried out
at the expense of secondary sites in France. Vacancy
rates rise as a consequence, adding to the long-term
slowdown in sales of retail businesses.
However, the rise in supply is not limited to less desirable
locations. Supply in attractive locations has also risen as
established retailers face slowdowns. For example, La
Halle has vacated numerous locations throughout France,
thereby creating opportunities for other retailers. More
recently, several fashion retailers (Courir, Etam, Armand
Thiery, etc.) were part of a consortium to negotiate for
the acquisition of the Bata stores. In addition to playing a
key role in the retail market, the fashion sector remains
one of the principal suppliers of prime slots, because it
has been weakened by changes in household
consumption, by the growth of retail websites, and by
new, aggressive retailers (Primark, etc.). C&A provides a
good example of current trends. The retailer has chosen
to expand in peripheral zones, and recently announced
that it was closing its store on the rue Serpenoise in Metz.
Other business sectors have also been active in recent
months. Jouéclub and La Grande Récré have been
playing musical chairs in the Lille region. Jouéclub closed
its store in the Tanneurs shopping center in central Lille to
take over La Grande Récré’s slot in Héron Parc
(Villeneuve d’Asq). Meanwhile La Grande Récré went in
the opposite direction, focusing efforts on its store on rue
Faidherbe.
These operations are typical of the reconfiguration
affecting the overall French retail market, for both
secondary and prime locations.
France | Q1 2016
188
199
191
190
180
0
5
10
15
20
25
30
35
40
45
50
165
170
175
180
185
190
195
200
2011 2012 2013 2014 2015
Average transaction (€ thousands)
Number of transactions (thousands)
Source: Baromètre BODACC 2016.

Rue Saint-Honoré
26%
Avenue
Montaigne
12%
Vendôme/Paix
12%
Faubourg Saint-
Honoré
10%
Saint-Germain-
des-Prés
10%
Other
30%
Expected openings of luxury stores in
Paris in 2016 | Geographic breakdown
High Streets
The sectors of beauty products, convenience stores, and fast-
food restaurants saw a profusion of openings and development
projects. Fashion retail, especially towards the upmarket end of
the spectrum, also remains a key player. Similar to the downsizing
trend that is inspiring Ikea to open in Italian city centers, high-
street locations in France are also attracting retailers usually
found only in peripheral locations. Several retailers of DIY and
household goods have shown a growing interest in city-center
locations (Weldom, Leroy-Merlin, etc.).
Paris
The slowdown in tourism may have weighed on retailer revenues,
but top slots in Paris are, at least for now, as attractive as ever.
Recently the Left Bank has seen deals in areas around rue de
Sèvres and boulevard Saint-Germain (Caudalie, Ba&sh, L’Artisan
Parfumeur, Vanessa Seward, etc.). Le Marais is still a favorite
among retailers, whether for high-end cosmetics (Natura Brasil,
Estée Lauder) or first-ever openings in France by international
retailers (Scalpers, Supreme, Anine Bing). In addition, the rue des
Archives will soon have another prestigious luxury occupant
joining the ranks of Fendi, Givenchy, Gucci, Moncler, and
Valentino: John Galliano is slated to move into no. 30 in a few
months’ time.
Luxury remains a driving force in Paris, draining 42 out of 47
luxury openings expected in France in 2016. Development
continues to focus on rue Saint-Honoré, with creations (Dior
Parfums), relocations (Marc Jacobs), and pop-up stores
(Repossi). These examples confirm that the largest groups are
expanding their footprint on the most prestigious high streets, as
seen also on rue du Faubourg Saint-Honoré, on avenue
Montaigne, and in the Place Vendôme / Rue de la Paix
neighborhood. By contrast, a few luxury retailers have chosen to
reduce their network. For example, Blumarine closed its store at
58 rue du Faubourg Saint-Honoré while simultaneously expanding
its flagship at 56 avenue Montaigne.
As previously observed in the historic center of Paris luxury,
arbitrages and the lettings that follow in the wake of major
acquisitions bode well for other key high streets in Paris. For
example, several openings and large-scale development projects
will keep the Champs-Élysées in the spotlight over the next few
months.
France | Q1 2016
Source: Cushman & Wakefield.
NB: the various types of openings include creations of new stores, reopenings after
refurbishment, store relocations and extensions, pop-up stores, and retailer name
changes.
Prime rental values (€/m²/year ZA)
High Streets Q1 2015 Q1 2016
Paris | Avenue des Champs-Élysées 18,000 18,000
Paris | Rue du Faubourg Saint-Honoré 11,000 13,000
Paris | Boulevard Saint-Germain 6,500 6,500
Paris | Boulevard Haussmann 8,000 8,000
Paris | Rue des Francs-Bourgeois 4,500 4,500
Paris | Rue de Rivoli 3,500 3,500
Bordeaux | Rue Sainte-Catherine 2,200 2,200
Cannes | Boulevard de la Croisette 8,000 8,000
Lille | Rue de Béthune 2,000 1,800
Lyon | Rue de la République 2,400 2,400
Marseille | Rue Saint-Ferréol 1,800 1,600
Strasbourg | Rue des Grandes Arcades 2,000 1,800
Nice | Avenue Jean Médecin 2,200 2,200
Toulouse | Rue d’Alsace-Lorraine 2,000 2,000

Provinces
The top slots of large provincial cities always whet the appetite of
large retailers. A few international newcomers have arrived on the
scene (LoveStories in Lille). Meanwhile more established retailers
are building their network after an initial opening in 2015
(Harmont & Blaine in Cannes, Nyx in Marseille), and the fashion
giants are reaffirming their ambitions for France. H&M has opened
stores in several midsize cities (Alençon) and introduced
relatively upscale brands in large cities where the retailer has a
solid foothold (COS in Aix-en-Provence, & Other Stories in
Strasbourg). Some retail groups are developing a franchise
business, which offers the advantage of rapid network expansion
and brand visibility while limiting the risk of store openings.
Starbucks has chosen this business model. Already firmly
established in Paris, Starbucks has opened (or will soon be
opening) several cafés in Strasbourg, Nantes, and Toulouse.
In addition to providing a showcase for retailers, large
metropolitan areas are a source of consumer spending. Since the
middle of the 2000s, it is the largest French cities that have
benefited the most from changes in household revenues.
Bordeaux has enjoyed the highest rise in purchasing power
(+6.8% between 2006 and 2011). Not far from Bordeaux, Toulouse
also boasts solid economic and demographic growth and
therefore is an attractive target for retailers. Nice and Cannes are
also desirable, not least because tourism on the Riviera was hit
less hard than Paris after the terrorist attacks of 2015. Finally,
Lyon also remains one of the most sought after cities in France, a
trend that will be further enhanced by new openings in the
Grolée-Carnot sector. Above all, two major projects are under
way: the conversion of the former Banque de France building,
already leased to Nike and Maxibazar, and the conversion of
the Grand Hôtel-Dieu, whose 16,000 m² of retail and restaurant
space are currently being let.
By contrast, as independent retailers close and retail groups
move to peripheral zones or to hypercenters in large
conurbations, the centers of midsize cities and smaller urban
areas continue to decline. These problems explain the fall in rental
values and the rise in vacancy rates in several city centers, where
landlords are granting increasingly generous incentives.
France | Q1 2016
Grand Hôtel-Dieu | Lyon (69)
Harmont & Blaine | Cannes (06)

Shopping centers
Faced with declining visitor numbers and recent closings of sales
points, the French market is in a difficult pass made worse by
aggressive negotiation tactics. In addition to rent adjustments and
higher contributions to fit-out costs, the range of incentives
granted by landlords has been widened in order to meet the
growing demands of tenants. Among the incentives granted are
various lease concessions and more frequent application of
variable rent payments.
In addition to the successful take-up of large expansion and
creation projects (L’Avenue 83, near Toulon), several other factors
brighten an otherwise challenging environment. Large regional
shopping centers remain unperturbed because they are less
exposed to competition from other formats and from retailer
arbitrage. Retailers and new concepts prefer such regional sites,
which provide rapid and effective gains in visibility (Tiger in
Centre Bourse, Sostrene Grene in La Part-Dieu, Zing Pop Culture
in Carré Sénart). Also, shopping centers continue to benefit from
the growth of beauty products (Nyx and Rituals at 4 Temps,
Sabon at Val d’Europe), food and beverages (Le Palais des Thés
at V2 and Kusmi Tea at Italie Deux), and food outlets (Vapiano
in Bercy Village).
Retail parks
More than ever, the retail-park market appears to be one of the
big winners from the implementation of new strategies adopted
by retailers in search of network cost cutting. Retail parks are now
considered to be a viable alternative to shopping centers and city
centers, and are increasingly in demand. After performing
conclusive market studies, several fashion retailers have
confirmed their network development in peripheral zones (Happy
Chic, H&M, C&A). Other retailers (Vertbaudet) are focusing their
development on retail parks, where newcomers are also starting
to appear, as confirmed by the success of new, high-quality
schemes (Promenade de Flandres, near Lille). The growing
diversification of the retail-park market is also exemplified by the
development of smaller formats adapted to smaller catchment
areas, such as stores of 400−800 m² opened by Maisons du
Monde and Black Store (Intersport Group).
By contrast, relocations and retailer difficulties have increased
vacancy rates in secondary markets. The subsequent correction in
rental values has sometimes benefited retailers and discount
concepts (Action, Confo Dépôt), which are able to expand at
minimal cost.
Prime rental values (€/m²/year)
Shopping centers*
Regional centers | Ile-de-France 2,000 2,000
Regional centers | Provinces 1,400 1,400
Retail parks*
France 180 180
*For 150 m² of well-located retail space (clothing retailers or services) in existing
shopping centers that are leaders in their catchment areas.
*For 1,000 m² and new space in prime slots in strong catchment areas.
France | Q1 2016
+ 0.2 %
Performances
- 1.0 %
Visitor numbers
Business indicators in shopping centers
France | Full-year 2015
Source: CNCC

Prime yields
2,75%
4.00%
5.00%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
9,0%
10,0%
High streets (Paris)
Regional shopping centers
Retail parks (Ile-de-France)
Investment in French retail properties
France | Q1 2016
INVESTMENT MARKET
In the first quarter of 2016, €2.8 billion was invested in the
French commercial-property market, a decrease of 32%
year on year. Investment in retail properties
(approximately €1 billion) declined a moderate 8% and
accounts for 35% of all property investment in France
(26% for the same period in 2015).
The total number of transactions fell slightly, from 32 in
the first quarter of 2015 to 26 in the first quarter of 2016.
Nonetheless, a rise in both number and volume in the
€100−200 million segment (three deals worth €410
million, compared with only one deal worth €122 million in
the first quarter of 2015) helped to offset the decline in
the number of transactions of more than €200 million:
two in the first quarter of 2015 (the Qwartz shopping
center, near Paris, and the Nicétoile in Nice), compared
with only one in the first quarter of 2016.
So far this year, investment has been directed mainly at
assets in peripheral zones (e.g., the Catinvest portfolio
sold to Frey for just under €150 million, and Hammerson’s
sale of Villebon 2 to a consortium of French investors for
€160 million). Analysis by asset type shows a strong rise
in retail parks (47%, compared with 10% a year earlier).
With a share of only 3%, shopping centers and malls have
fallen sharply in the absence of large deals. A rebound is
likely later this year. Ground-floor assets have also
progressed (29%, compared with 21% a year earlier).
In addition, Resolution Property’s sale of two factory-
outlet centers in Roubaix and Troyes for €210 million—the
largest retail deal of the first quarter—explains the large
share (21%) of this asset type.
Ile-de-France attracted €530 million in the first quarter of
2016, accounting for 54% of total retail investment in
France for the period. Investment volume was boosted by
the sale of Villebon 2. Other deals were mainly for
peripheral assets (Le Forum in Brétigny-sur-Orge) and a
few luxury stores in Paris (e.g., the Armani and Davidor
flagships at 2 avenue Montaigne, and the Zilli flagship at
48 rue François 1er). Elsewhere in France, investment
volume totaled nearly €460 million, of which 68% was
from Resolution Property’s sale of two factory outlets and
the Catinvest portfolio.
French investors continue to dominate the French market,
and provide 52% of all retail investment in France. In the
first quarter of 2016, French investment covered all types
of assets and was carried out mainly through SCPIs and
OPCIs (French REITs), insurance companies, private
health insurers, and property-investment firms. American
investors (Ares Management, Carval Investors) were very
active in the first quarter of 2016 and accounted for 27%
of total investment, including several large deals (factory
outlets in Roubaix Troyes, two retail parks in Ile-de-
France).
2.3
4.8
1.2
1.9
3.6
3.3
3.6
4.0
7.7
5.2
1.0
0%
20%
40%
60%
80%
100%
0
1
2
3
4
5
6
7
8
9
20062007200820092010 2011 2012 2013 2014 2016 2016
Q1
Investment in retail properties (€ billions)
Share of total investment (%)

Examples of openings in 2016
High streets M²
McDonald | Paris (75019) 32,000
Ex Banque de France | Lyon (69) 4,500
Cœur de Nantes | Nantes (44) 3,500
Marché Saint-Germain | Paris (75006) 3,500
Palais de la Bourse | Lille (59) 1,000
Shopping centers M²
Ametzondo | Saint-Pierre-d’Irube (64) 76,000
L’Avenue 83 | La Valette-du-Var (83) 51,000
Centre Bourse | Marseille (13) 21,500
Espace Fenouillet | Fenouillet (31) 17,500
Forum des Halles | Paris (75001) 11,500
Retail parks M²
Ma Petite Madelaine | Chambray l. Tours (37) 31,500
Les Montagnes | Champniers (16) 22,000
Les Blancs Monts | Cormontreuil (51) 18,500
Park Avenue | Saint-Maximin (60) 16,000
Cap Émeraude | Pleurtuit (35) 17,300
FRENCH RETAIL PROPERTY STOCK
New shopping centers usually do not open in the first quarter.
Therefore only a small portion of the total surface area expected
in 2016 has been opened since January. Among the most
important openings in the first quarter of 2016 was the Cœur de
Nantes, an extension of the famous Passage Pommeraye where 10
retailers will be present, in addition to the Orange and Nespresso
flagships. Elsewhere, the Saint-Maximin retail zone (in the Oise
department, outside Paris), is still undergoing transformation. The
retail zone was opened in 2015 after the redevelopment of 16,000
m² of the former Castorama (St-Max Avenue). Park Avenue has
just opened with a comparable surface area and is leased to
several retailers that are very active in peripheral zones (e.g., Gifi,
Stokomani, and Orchestra). Several other openings expected by
the end of the year will confirm this trend towards the
replenishment of large retail zones (e.g., work under way in the
town of Cormontreuil, near Reims, after the relocation and
expansion of a Leroy-Merlin store).
The second quarter will see the grand opening of several large
shopping centers planned for 2016. Two of the shopping centers
have already been opened: L’Avenue 83 (51,000 m², near Toulon),
whose open-air design is somewhat similar to the Polygone
Riviera’s (near Nice), completed in October 2015; and the
redesigned and expanded Forum des Halles in Paris. This project
is the first of a long series of expansions of some of the largest
regional shopping centers planned for the period 2016−2019 (Cap
3000 in the South of France, and Carré Sénart, Vélizy 2, Parly 2,
and Val d’Europe in the Paris region).
The opening of the Forum des Halles was symbolic of the
upheavals under way in Paris. Nearly 200,000 m² of new retail
space will be available for openings in Paris between 2016 and
2018. Much of this space is in central Paris (Marché Saint-Germain
in the 6th). Several projects (Poste du Louvre, Samaritaine,
and Louvre des Antiquaires) are located in a small area bordered
by the Louvre (west), rue Étienne Marcel (north), the Seine
(south), and the Forum des Halles (east). Other major projects in
Paris include retail premises in several train stations as well as
retail projects related to the emergence of several large urban
development zones (the ZAC Clichy-Batignolles in the 17th, and
the 32,000 m² of retail properties developed by Altarea and
planned for 2016, on the site of the former McDonald’s warehouse
in the 19th).
Source: Cushman & Wakefield/Extensions and redevelopment projects are highlighted
in blue.
France | Q1 2016
Cœur de Nantes | Nantes (44)

REGULATORY UPDATE
Update on the implementation of the Macron law
The Ministry of the Economy recently published its first report on
the implementation of the Macron law. With regard to Sunday
and evening openings of retailers, 43% of the 70 largest French
cities increased the number of Sunday openings in 2016 (from five
to seven Sunday openings per year in Montpellier and Toulouse,
and from five to eight in Lille and Belfort, etc.). Nearly one-fourth
of these cities opted to apply the maximum number of Sunday
openings (12). In Paris, and for the first time, retailers were able to
stay open on consecutive days without closing for a period of six
weeks (from mid-November to January 1).
In addition to the 12 international tourist zones (ITZ) in inner Paris,
as defined in September 2015, six new ITZ were established by
several decrees dated February 5, 2016. The ITZ are located in
Serris, Nice, Cannes, Cagnes-sur-Mer, Saint-Laurent-du-Var, and
Deauville. Four shopping centers are located in an ITZ: Val
d’Europe, near Paris, and Nicétoile, Cap 3000, and Polygone
Riviera in Nice and the region around Nice. Polygone Riviera
opted to apply the new law as early as mid-April, even though not
all of the stores in the shopping center will open on Sundays (e.g.,
the Beaugrenelle shopping center in Paris). Although several
retailers have already signed agreements, other large groups have
yet to define their policies. For various reasons, not all large
retailers wish to apply the law systematically, a situation that can
slow shopping-center lease negotiations.
Change in the legal framework of permits for urban planning
Designed to clarify the objectives of economic stimulus to
support the construction sector, Decree 2016-6 of January 5,
2016, governing the length of validity of permits for urban
planning and containing various provisions relating to land rights
and related taxation, established the limit of validity of permits for
urban planning at three years, compared to two previously
(building permit, demolition permit, development permit, etc.). It
is now possible to extend permits twice, for a period of one year
each time, compared with once for one year previously. The
regulatory change raises significantly the length of validity of a
permit for urban planning.
France | Q1 2016
The 18 international tourist zones

Cushman & Wakefield France
21 rue Balzac
75008 Paris
cushmanwakefield.fr
CONTACTS
Christian Dubois
Head of Retail Services
christian.dubois@cushwake.com
David Bourla
Head of Research
david.bourla@cushwake.com
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Retail property market France | Q1 2016

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