Retail prime rents will fall in many Western European markets while they are expected to continue rising in most emerging economies, according to the European Retail Property Market 2009 research report by property advisor King Sturge.

King Sturge believes that next year is going to be the year of the squeeze for the retail property market, particularly for the five big economies of the UK, Germany, France, Spain and Italy. King Sturge predicts average retail rents will decline marginally in London and more severely in cities such as Milan and Madrid.

However, on the Continent the outlook is not all negative. Emerging economies such as Bulgaria, the Czech Republic, Poland, Romania, Slovenia and Slovakia will see positive economic growth. Consumer spending growth and the need for modernisation will help support the retail property market in these countries. Retail rents will rise by up to 10% in certain key locations in cities such as Bucharest, Prague and Warsaw.

Retail property is precariously placed but it is important to distinguish between the investment and occupier markets. Although the advisor expects some retailers to fail in 2009, occupier markets are generally more resilient. However, occupiers are becoming increasingly demanding in their space requirements and they will drive a harder bargain with landlords and shopping centre owners.

The re-pricing of retail assets will create ‘extraordinary’ investment opportunities for those cash-rich players, such as sovereign wealth funds, the report concluded. King Sturge estimates that cross-border retail sales now make up around 12% of all European retail sales. A difficult retail market is more likely to fuel than stymie further cross-border expansion amongst retailers. A depressed retail climate plays more into the hands of the large retail multinationals and they are more likely to build share, the report said.