Tuesday, 25 August 2026
Europe’s retail property market is becoming increasingly divided between prime destinations that continue to attract international brands and secondary locations facing greater pressure as retailers reassess store networks. Rather than returning to aggressive expansion, many operators are concentrating investment on fewer, stronger locations where customer spending, footfall and brand visibility can support larger and more productive stores.
The shift comes against a relatively subdued consumer backdrop. Colliers expects real household incomes across Europe to increase by only around 0.5% in 2026, while real retail spending growth is forecast at approximately 1.5%, compared with 2.4% in 2025. Within the eurozone, retail spending growth is expected to be weaker at around 0.9%. Consumer confidence also deteriorated during the first half of the year.
Pressure on household budgets is particularly relevant for discretionary retail. Research cited by Colliers indicates that almost two-thirds of European consumers surveyed earlier this year were either trying to reduce consumption or becoming more active in seeking discounts and better value. Clothing, household goods, restaurants and other non-essential categories are among those exposed to this change in behaviour.
Luxury retail has also become more uneven. European spending on personal luxury goods declined by an estimated 1% to 3% in 2025, although individual brands have performed very differently. Richemont, Hermès and Ralph Lauren continued to generate revenue growth, while LVMH and Kering faced weaker conditions. The divergence suggests that the luxury market itself is becoming increasingly dependent on brand strength, customer profile and location rather than benefiting from uniform growth.
The consequences are becoming visible in retailers’ property strategies. Luxury groups substantially expanded their global store networks after 2019, but that expansion has slowed. Kering, for example, is pursuing a major portfolio reduction and expects to close around 100 stores globally after recording 75 net closures during 2025.
A similar process is taking place among mainstream fashion groups. Retailers including Inditex and H&M have reduced overall store numbers while concentrating investment on stronger locations and, in some cases, larger flagship stores. The objective is increasingly to generate more sales from individual locations rather than maintain the widest possible physical network.
This does not necessarily point towards declining demand for physical retail property. Instead, demand is becoming more concentrated.
For landlords, that distinction is important. A retailer closing several smaller or weaker stores may simultaneously invest heavily in a flagship location capable of attracting customers from a much wider catchment. Properties offering strong footfall, accessibility, affluent customers and an established concentration of complementary brands therefore become more valuable to occupiers even as overall store numbers decline.
The rental outlook reflects this growing separation. Colliers expects rents for prime high streets and leading shopping centres across most monitored EMEA markets to remain broadly stable during 2026, with further growth possible where availability is particularly restricted. Secondary locations face greater risk of rental pressure as retailers become more selective about which stores justify continued investment.
The result could be an increasingly two-speed European retail market. Leading high streets and dominant shopping centres can potentially maintain occupancy and rental performance even during relatively weak consumer conditions, while secondary properties may have to offer greater flexibility, lower rents or substantial investment to retain occupiers.
Central and Eastern European capitals could participate in this shift, although their prospects vary considerably.
Warsaw provides one example of both the opportunity and the limitations. International luxury brands without a direct Polish presence continue to examine the market, including possibilities for directly operated stores and partnerships with local operators, according to Colliers.
That interest should not, however, be interpreted as evidence that Warsaw has already developed into a major European luxury destination. The Polish capital remains behind established premium markets in areas important to luxury operators, including the concentration of high-spending international visitors, the depth of existing luxury retail and the availability of established premium shopping districts. Colliers itself identifies these factors as constraints on further development.
Warsaw is therefore better viewed as an example of how selective international expansion could create opportunities in CEE rather than as a market certain to experience a wave of luxury openings. Brands that once required extensive national store networks may now be willing to enter a country through one strategically selected location, but the property must meet increasingly demanding criteria.
The same principle applies elsewhere in Europe. As retailers become more selective, the strength of individual properties and locations becomes more important than broad assumptions about national retail-market growth.
For investors, this could change the assessment of retail assets. Occupancy rates and lease lengths remain important, but they do not necessarily reveal whether tenants regard individual stores as strategically important. Catchment spending power, footfall, tourism, transport connections, competing supply, tenant productivity and the surrounding brand mix are becoming increasingly relevant indicators of future income resilience.
Secondary assets face a different challenge. Properties unable to demonstrate sufficient customer traffic or differentiation may have to reposition towards alternative retail formats, leisure, food and beverage, services or mixed-use functions. Others could require substantial capital expenditure to remain competitive with stronger destinations.
The European retail market is therefore not simply moving towards either recovery or decline. It is becoming more polarised.
The more important property implication is that retailers are not necessarily abandoning physical stores; they are becoming more demanding about where those stores are located and how much each location contributes to their business. That could strengthen occupancy and landlords’ negotiating positions at Europe’s best retail destinations while increasing pressure on properties unable to demonstrate comparable footfall, spending power or strategic importance.
The next stage of the European retail market may consequently be defined less by the overall amount of space retailers occupy and more by an increasingly sharp distinction between locations they consider essential and those they can afford to leave behind.
