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Value retail finds a new outlet

European consumers have embraced the opportunity to shop for brand-name merchandise at bargain prices. This rapidly expanding market is providing enormous opportunities for operators, brand manufacturers and retailers alike. Today, the continent is following in the footsteps of the United Kingdom, where factory outlets have gotten off to a very successful start.

The timing couldn't be better. With the introduction of the Euro and the elimination of most internal trade barriers, the conditions are now ripe for a new crop of factory outlet centers to bloom across the European continent. Factory outlets, once synonymous with the United States, have become a European phenomenon popular with residents and vacationers from other countries.

Across Europe, retailers, developers and investors are pouring money into a groundswell of new developments, all looking to capture a slice of the burgeoning market. As this continues, factory outlet center operators are diversifying the centers themselves, incorporating leisure elements such as multi-screen cinemas, adventure playgrounds, restaurants and cafés.

Steady growth

The factory outlet market has grown steadily since 1995, and rapidly gained momentum beginning in 1997. According to recent reports, more than two dozen factory outlet sites are up and running in the UK and more than 10 are planned to open in the next two years. The UK market alone has grown by approximately 60% over the past decade, and has nearly doubled in size.

The rapid growth of factory outlets in the UK has led to the market for value retail centers there becoming saturated. As a result, investors and retailers now are looking to continental Europe for new development opportunities. In addition to the common currency and market, continental Europe offers a large, mobile and prosperous population, as well as other advantages. While there will be opposition to outlet development in some European markets where large independent retailers are politically powerful, in general continental governments seem to be very receptive to outlet center development. This is particularly true among the emerging markets in the Central and Eastern European areas, which are eager for investment and development.

In 2001, several new outlet centers opened, including Sodertalje in Stockholm, Sweden; Batavia Stad in the Netherlands; Campera in Portugal; and Brand Central, Rathdowney in Ireland. Royal Quays (Newcastle, UK) and B5 (Berlin) also developed “second phase” additions in 2001 due to their success.

Several new outlet centers are due to open in 2002, including centers in Spain (Festival Park — Mallorca), the Czech Republic (Excalibur) and Germany (Heilbronn). And at least seven are planned to open in 2003, in Spain (Valencia and Murcia), Italy (Vicalungo), Belgium (Gent-De Nieuwe), France (Tournus) and Poland (Katowice). Tenants in these outlet centers include Levis, Reebok, Nike, Benetton, Fila, Diesel, Calvin Klein, Adidas, Marks & Spencer and many others.

Operators and retailers are seeking development and strategic advice for acquisitions and disposals, letting and agency, together with in-depth financing, investment services and operational management — either on a scheme-by-scheme or portfolio basis. Knowing the right people and constantly monitoring the movements in the market is the primary challenge in this sector.

Location, location, location

Of particular importance is site selection. Identifying a potential site requires an analysis of factors such as population density, regional planning laws, proximity to tourist attractions and access to mass transit and major roadways.

Campera Outlet Shopping in Campera, Portugal, for example, is located only 30 minutes from Lisbon on the A1 motorway, the principal route connecting Portugal's two largest cities. More than four million people are located within a 90-minute drive of the center, which opened less than a year ago. A third phase is planned, which will include leisure activities to complement the existing retail offerings.

Italy and Germany have emerged as the developer's prime targets. Italy's relaxed planning laws have made it a favorite location for developers and operators. Germany is a key location for development in large part because of its location in the center of Europe and its large, prosperous population.

In short, Europe's vast market offers tremendous potential for retailers, owners, developers and operators. Given the momentum generated by the EU's common currency and consumer desire for value-priced brand products, the climate for investment and development will also continue to be favorable. Factory outlets, so long synonymous with the United States, have just begun to thrive across the Atlantic.

Graham Coxhead is the factory and designer outlet specialist for the London office of GVA Worldwide, an organization of market leaders in more than 20 countries.

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