Health & Beauty to Lead Retail Space Requirements Over Next Five Years

Key Retail markets to witness further growth in physical space requirements Trends are mirrored in the Middle East with focus on ‘bricks and mortar’ retail

Retailer demand for physical store space will remain steadfast throughout a number of key retail markets over the next five years, with the Health and Beauty sector leading the way in driving future growth requirements according to global real estate advisor CBRE.

The new analysis examines six major retail markets; China, America, Spain, Germany, Italy and the U.K and focuses on projected retail space requirements over the next five years within the key sectors of Grocery, Apparel and Footwear, Health and Beauty, and Home and Garden.

CBRE predicts that growth in Health and Beauty space requirements will outpace other sectors with China to witness 8.1% growth, followed by Germany (4.5%), Italy (4.2%), the U.K (1.7%), U.S (1.6%), and Spain (1.1%). Growth across this sector will continue to be fueled by technology and innovation paired with a rising demand from consumers who are investing in themselves.

Natasha Patel, Director, Global Retail Research, CBRE, comments: “Technology, innovation and social media have been key to the Health and Beauty sector’s success and will remain an integral part of its strategy in the years ahead. We’re seeing brands introduce virtual make up screens, allowing consumers to visualize what products look like before committing to a purchase, and creating an experience that draws consumers into the physical store. The sector has seen brands create a joined-up omnichannel approach with their social media networks and physical store, so much so that there is evidence of brands using analytics of their social media profiles to drive their store leasing strategy.”

Commenting on trends witnessed in the Middle East, and in particular in the UAE, Anthony Spary, Associate Director of Investor Leasing, CBRE Middle East, said, ““These trends are prominent in the Middle East region with a continued focus on physical retail. We expect to see retailers adapting to more of bricks and clicks model in the coming years, with the upcoming supply offering retailers the ability to optimize their portfolio, gain efficiencies and connect more with the consumer through an omnichannel platform. Currently, there is approximately 1.5 million sqm of retail supply expected to come online in Dubai over the next 3 years.”

He added “We continue to see new brands entering the region with landlords paying particular attention to F&B, family entertainment and experiential retail. Malls such as Meydan One are seeking to maximize these types of concepts and offer a new shopping experience to consumers never seen before in the Middle East.”

The data predicts the Home and Garden sector will witness significant levels of growth in space requirements – in China an extra 20.4% of space will be required, followed by Spain (2.3%), Italy (1.2%) and Germany (0.8%). The Apparel and Footwear and Grocery categories are also expected to see steady growth across many markets – in Europe, Spain leads in both categories with a 2.2% and 1.2% rise in space requirements respectively.

David Close, Head of EMEA Occupier transactions at CBRE said: “Grocery, Health and Beauty, Apparel and Footwear, and the Home and Garden sectors have a real opportunity to redefine bricks and mortar retail, and we expect to see steady demand for retail space in many markets for each of these sectors.

“Although the retail sector is in a transformational stage, the physical store will remain a vital driver of customer acquisition, retention and revenue. Our research demonstrates that despite an increase in online sales, consumers prefer the omnichannel retail experience, and will continue to use the store as a critical part of inspiration, education, testing, and engagement.”

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