The Paris retail market: change is in the air

Transcription

1 01 RETAIL The Paris retail market: change is in the air What is the outlook for Paris s main shopping districts?

2 2 CONTACT David Bourla Chief Economist +33 (0) Knight Frank SNC 2017 Knight Frank Commercial Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independant advice customised to their specific needs. Knight Frank Research Reports are also available at KnightFrank.fr. This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Commercial Research or Knight Frank SNC for any loss or damage resulting from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank SNC in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Commercial Research. Knight Frank SNC is the French branch of Knight Frank LLP. Knight Frank LLP is a limited liability partnership registered in England.

3 RETAIL THE PARIS RETAIL MARKET: CHANGE IS IN THE AIR What is the outlook for Paris s main shopping districts? 3 Antoine Grignon Head of Retail Services Foreign tourists are back, economic growth is accelerating, and Paris will be hosting the 2024 Olympic Games. After the terrorist attacks of 2015, the city of Paris seems to have transformed from a state of shock to a state of grace. The city s retail market has undergone profound change, aided by the creation of international tourist zones, the extension of Sunday openings, and high-profile projects such as the Marché Saint-Germain and the new Forum des Halles. And that is only the beginning. Creations and refurbishment of retail outlets, openings of flagships, arrivals of new players... Other projects will be launched soon, to the extent that the months between now and the early 2020s could be an important step in the history of the Paris retail market. Aside from political and economic change often difficult to forecast other factors more or less directly linked to retail may prove to be decisive. The expected growth in international tourism, the openings and refurbishments of luxury hotels, and the development of ambitious urban and cultural projects will also play a role, assuring Paris s success on the global stage in a regulatory context that provides greater stability and clarity for international retailers. Antoine Salmon Head of Retail Leasing While the hierarchy of prime Paris high streets will probably not be shaken up, the outlook for each shopping district suggests that change is on the horizon. Some streets will consolidate their positions, while others may develop significantly so much so that the various shopping districts of the French capital will be more clearly connected, resulting in a Paris retail market that is denser and more consistent.

4 4 OUTLOOK GOOD FOR THE PARIS RETAIL MARKET Domestic consumption rose considerably in 2016, with household spending up 1.8% from a year earlier. This acceleration is expected to slow in 2017 and beyond (+1.3%, and +1.5% in both 2018 and 2019) because of higher inflation and lower purchasing power. However, the outlook for the retail market is clearer than it was just a few months ago. The election of Emmanuel Macron and a pro-european majority has reassured the business community. This change in the executive power has coincided with a significant improvement in consumer confidence, which in June reached its highest point since 2007, although it has since weakened. Other indicators too have become positive, proof that rising economic activity is beginning to help the job market. But while the economic improvement in France is far from negligible, the momentum of the Paris market and its prime shopping districts depends on much more than just French retailers and local customers. International visitor numbers and the strategies employed by large brands aiming for access to an exceptionally beautiful global showcase also play a vital role. A LARGE POOL OF TOURISTS The recovery of tourism is no doubt one of the factors that will have the greatest impact on Paris s major shopping districts. After two years of decline following the terrorist attacks (decline of 12% in overnight stays by foreign visitors in Paris in 2016), activity has picked up significantly so much so that the first half of 2017 was the best in a decade. Except for a decline in a few tourist groups such as the British, whose purchasing power has weakened along with their currency, most other nationalities have experienced a significant rise in visitor numbers. This is the case for the Americans and Germans (+20% in overnight stays year on year). The Paris market has also benefitted from the return of Japanese tourists (+41%) and their fondness for luxury goods. In addition, Chinese tourists are once again on the rise (+30%) after a temporary decline in 2016, confirmation of their position as the largest non- European tourist group after the Americans. Development in tourism revenue in the Paris region H vs. H billion in tourism consumption Total international tourists million + 88 million + 47 million + 45 million + 45 million million Total French tourists Source: Summer report for tourism activity in Paris Île-de-France, Paris region tourism board million

5 RETAIL 5 The recovery of the tourism market is expected to extend beyond Like other large cities, Paris will benefit from the strong growth in global tourism. A UNWTO study estimates annual growth of 3.3% in the number of international tourist arrivals worldwide between 2010 and 2030, or +43 million arrivals per year during the period, compared with +28 million per year between 1995 and In all, there will be 1.3 billion tourist arrivals in 2020 and 1.8 billion in 2030, compared with merely 940 million in Unsurprisingly it is the emerging regions that will see the largest growth (+5% per year in Africa and Asia-Pacific during the period ). Mature markets will also benefit, with growth of nearly 2% per year in western Europe, where the number of international tourist arrivals will rise from 154 million in 2010 to 222 million in Paris like London, a key European destination for foreign tourists will reap some of the benefits of this growth. The economic potential is all the greater given that France, with $42.5 billion in international tourism receipts in 2016, came in well behind the USA ($206 billion), Spain ($60 billion) and Thailand ($50 billion). International tourism growth is at the forefront of challenges faced by the city of Paris. In its outline for tourism development, the city of Paris has created more than sixty action plans designed to further enhance Paris s position as the world s leading tourist city by Among the actions are hosting at least one major international event per year, the creation of showcases for Paris gastronomy, the implementation of a security plan for tourists, and the creation of 12,000 additional rooms by 2020 to ensure adequate high quality and diversified accommodations for all budgets and types of clients. International tourist arrivals Current trend and forecast Million 2,000 1,800 1,600 1,400 1,200 1, F 2030F Africa Middle East Americas Asia and Pacific Europe Source: UNWTO, Tourism highlights 2017 edition.

6 AV. D IÉNA AV. MYRON HERRICK AVENUE F. D. ROOSEVELT Pont de Levallois Bécon BD PÉRIPHÉRIQUE BD BESSIÈRES Porte de Saint-Ouen RUE VAUVENARGUES BD NEY BD NEY Porte de Clignancourt BD NEY Porte de la Chapelle AV. INGRES 6 BD DE BEAUSÉJOUR BD BINEAU Les Sablons Porte Dauphine Avenue Foch Avenue Henri Martin Rue de la Pompe La Muette AV. VICTOR HUGO RUE DE PASSY BD PÉRIPHÉRIQUE AV. DES TEMES AV. DES TEMES RUE DE COURCELLES BD DE COURCELLES RUE DU FAUBOURG SAINT-HONORÉ AV. DE WAGRAM AV. DE WAGRAM AV. FOCH AV. FOCH AV. DE FRIEDLAND VOIE GEORGES POMPIDOU VOIE GEORGES POMPIDOU BD BINEAU AV. DE VILLIERS AV. DE MALAKOFF AV. RAYMOND POINCARRÉ QUAI DE GRENELLE Louise Michel BD PÉRIPHÉRIQUE AV. KLEBER BD PEREIRE AV. VICTOR HUGO AV. DE NEW YORK Champerret AV. KLEBER AV. DU PRÉSIDENT WILSON QUAI BRANLY BD PEREIRE AV. D IÉNA AV. DE SUFFREN BD BERTHIER AV. MARCEAU AV. PIERRE 1 ER DE SERBIE AV. HOCHE AV. HOCHE AV. DE NEW YORK RUE DE PRONY RUE DE L UNIVERSITÉ BD. DE GRENELLE AV. GEORGE V AV. DE SUFFREN BD BERTHIER AV. DE WAGRAM RUE WASHINGTON RUE PIERRE CHARRON AV. DE LA BOURDONNAIS BD PEREIRE AV. DES CHAMPS-ELYSÉES AV. DES CHAMPS-ELYSÉES RUE LA BOÉTIE AV. MONTAIGNE COURS ALBERT 1 ER AV. DE VILLIERS AV. DE VILLIERS RUE DE PRONY RUE DE COURCELLES BD BERTHIER BD MALESHERBES RUE DE LISBONNE BD HAUSSMANN AV. MATIGNON AV. DE CLICHY Anatole France Brochant Neuilly Porte Maillot Porte Maillot Argentine Victor Hugo Boissière Trocadéro Passy Boulainvilliers Champ de Mars anelagh Tour Eiffel Bir-Hakeim Avenue du Pdt Kennedy Eglise Mirabeau Auteuil Javel André Citroën Charles Michels Charles de Gaulle Etoile BD HAUSSMANN RUE LA BOÉTIE COURS LA REINE BD DES INVALIDES RUE DE ROME Malesherbes Rome BD MALESHERBES RUE DE CONSTANTINOPLE QUAI D ORSAY RUE DU ROCHER RUE DU FAUBOURG SAINT-HONORÉ Assemblée Nationale Saint RUE DE BABYLONE François-xavier AV. DE CLICHY BD MALESHERBES RUE SAINT-LAZARE RUE ROYALE RUE DE GRENELLE AV. DE CLICHY RUE SAINT-HONORÉ RUE DE RIVOLI RUE DE RIVOLI RUE DE L UNIVERSITÉ BD RASPAIL RUE DE CLICHY RUE DE PROVENCE RUE DE RIVOLI QUAI VOLTAIRE BD SAINT-GERMAIN RUE DE RENNES RUE DU FOUR RUE PIERRE FONTAINE AV. DE L OPÉRA RUE MARCADET Pereire Abbesses Wagram Place de Blanche Clichy Ternes George V Kléber Iéna Commerce Emile Zola La Motte Picquet Grenelle Cambronne Villiers BD DE CLICHY Monceau Liège Courcelles Europe Saint-Georges Ecole Militaire Porte de Clichy Luxury hotels in Paris: recent and future openings Recent projects / refurbishment Dupleix Recent projects / creation Future projects / creation Future projects / refurbishment 22 Miromesnil Saint-Philippe-du-Roule Champs-Elysées Clemenceau QUAI D ORSAY Invalides RUE DE L UNIVERSITÉ La Tour Maubourg Varenne Ségur Sèvres Lecourbe Saint-Augustin Concorde Alma Marceau Pont de l Alma 1 La Fourche Musée d Orsay Solférino Simplon Guy Moquet Jules Joffrin RUE LA FAYETTE RUE JACOB BD DES ITALIENS RUE SAINT-HONORÉ RUE DE SEINE RUE DE SEINE RUE CAULAINCOURT RUE DU FAUBOURG MONTMARTRE RUE MONTMARTRE RUE DU MAIL RUE D ABOUKIR RUE DU LOUVRE RUE FRANCOEUR Pigalle Louis Blanc Poissonnière Trinité d Estienne Notre Dame-de-Lorette Saint-Lazare Cadet d Orves Haussmann Saint-Lazare le Peletier Havre Caumartin Auber Madeleine Franklin D.Roosevelt Tuileries Sèvres- Saint-Sulpice Babylone Opéra Lamarck Caulaincourt Château Rouge La Chapelle Barbès Stanlingrad Rochechouart Anvers Jaurès RUE DE ROCHECHOUART QUAI DE MÉGISSERIE Maulbert Mutualité Vaneau Rennes Duroc Saint-Placide Luxembourg Notre-Dame-des-Champs Falguière RUE DE CLÉRY RUE RÉAUMUR Réaumur Sébastopol Pyramides Pont-Neuf BD DE SEBASTOPOL BD DE SEBASTOPOL RUE DE RIVOLI Hôtel de Ville Rue du Bac Cité RUE DE TURBIGO RUE DU RENARD VOIE GEORGES POMPIDOU Gare Magenta du Nord Château Landon Colonel Fabien Gare de l Est Chaussée d Antin LaFayette Château Richelieu d Eau Drouot Grands Boulevards Jacques Bonne Bonsergent Nouvelle Goncourt Quatre-Septembre Strasbourg Saint-Denis Bourse Palais Royal Musée du Louvre 18 Odéon Cluny La Sorbonne RUE RAMBUTEAU BD DE MAGENTA BD SAINT-MARTIN Sentier République Etienne Marcel les Halles Châtelet Saint Germain des Prés Saint-Michel Saint-Michel Notre-Dame Mabillon Marcadet Poissonniers Marx Dormoy 20 Cardinal Lemoine Rambuteau Temple Arts et Métiers RUE DE RIVOLI RUE DU TEMPLE RUE DES 4 FILS RUE BÉRANGER RUE DE TURENNE RUE VIEILLE DU TEMPLE Parmentier Oberkampf Filles du Calvaire Saint-Sébastien Froissart Chemin Vert Bréguet - Sabin Saint-Paul Pont-Marie Bastille Sully - Morland la Rapée Jussieu Source: Knight Frank, APUR Saint-Ambroise Richard Lenoir Gare de Lyon Recent projects 1 Balard Boucicaut Félix Faure Royal Monceau Raffles 37 Lourmel avenue Hoche - Paris 8 Creation: 1928 Refurbishment: 2010 Convention Vaugirard Volontaires 8 Pasteur Fouquet's Barrière Montparnasse -Bienvenüe Edgar Quinet 46 avenue George V Gaité - Paris 8 Creation: 2006 Refurbishment: 2017 Valvin Raspail Port-Royal Future projects 15 Place Monge Censier Daubenton Lutétia 45 boulevard Raspail - Paris 6 Creation: 1910 Refurbishment: Les 2018 Gobelins Saint Marcel Gare d Austerlitz Quai de la Gare Mairie d Issy Prince de Galles 33 avenue George V - Paris 8 Creation: 1928 Corentin Celton Porte de Refurbishment: Versailles 2013 Four Seasons George V 31 avenue George V - Paris 8 Creation: 1928 Refurbishment: 2013 Plaza Athénée 25 avenue Montaigne - Paris 8 Creation: 1913 Refurbishment: 2014 Bristol 112 rue du Faubourg Saint-Honoré Paris 8 Creation: 1925 Refurbishment: Hôtel de Crillon 10 place de la Concorde - Paris 8 Creation: 1909 Refurbishment: 2017 Le Meurice 228 rue de Rivoli - Paris 1 Creation: 1835 Refurbishment: 2007 Malakoff Rue Etienne Dolet Malakoff Plateau de Vanves Porte de Vanves Ritz 15 place Vendôme Pernety - Paris 1 Creation: 1898 Refurbishment: 2016 Plaisance Park Hyatt Vendôme 5 rue de la Paix - Paris 2 Creation: 2002 Extension: 2007 The Peninsula Paris 19 avenue Kléber - Paris 16 Porte d Orléans Creation: 2014 Alésia Mandarin Oriental 251 rue Saint-Honoré - Paris 1 Creation: 2011 Shangri-La 10 avenue d Iéna - Paris 16 Creation: 2010 La Réserve 42 avenue Gabriel - Paris 8 Creation: 2015 Denfert-Rochereau Mouton Duvernet Saint-Jacques Cité Universitaire Campo-Formio Costes rue Saint-Honoré - Paris 1 Creation: 1995 Extension: 2018 Glacière Corvisard Place d Italie Hôtel Fauchon 11 place de la Madeleine - Paris 8 Creation: 2018 Cheval Blanc Samaritaine 2 quai du Louvre - Paris 1 Creation: 2018 Tolbiac Nationale Maison Blanche Kimpton 29 boulevard des Capucines - Paris 2 Creation: 2020 Poste du Louvre 48 rue du Louvre - Paris 1 Creation: 2019 Autograph Collection 37 rue de Bellechasse - Paris 7 Creation: 2018 So Sofitel 144 avenue des Champs-Élysées - Paris 8 Creation: 2021 Porte d Italie Olympiades Porte de Choisy chevaleret Porte d Ivry bib François

7 RETAIL A LARGER SUPPLY OF HIGH-END ACCOMODATIONS The upmarket trend in Paris hotel accommodations has accelerated since Among the contributing factors are the determination of both long-established and more recent hotel operators to capitalize on Paris s growth potential, the overdue refurbishment of hotels in order to meet the needs of an international clientele, competition from other European destinations, and the boom of new types of accommodation (e.g. Airbnb). In addition, the reorganization of the hotel classification system (implemented by law of 22 July 2009) resulted in the creation of the five star category including the distinction of Palace, which must contribute to the dissemination of French culture and to the appeal of France as a destination. Desire for this new rating prompted numerous long-established hotels to undertake major refurbishment and renovation work. Our vision: In 2022, Paris will be not only the most visited city in the world, but also the most welcoming one, thanks to high quality, sustainable tourism which creates jobs and enhances the city s international image. Source: Tourism Strategy 2022, Outline for Tourism Development in Paris, October With regard to the luxury hotel market, the number of hotel rooms in Paris has risen by more than 50% since the beginning of the 2000s. This growth is attributable to the arrival of newcomers (the Shangri-La in 2010, the Mandarin Oriental in 2011, the Peninsula in 2014) and to the refurbishment and extension of historic hotels (the Ritz, the Crillon and Le Fouquet s Barrière, following the Bristol, the Prince de Galles and the Plaza Athénée). There is no shortage of projects slated for completion by the beginning of the 2020s. The initial wave will include the first-ever Hôtel Fauchon, place de la Madeleine; the extension of the Hôtel Costes, rue Saint-Honoré; the Lutétia; the grand opening of the Cheval Blanc Samaritaine; and the first Marriott Autograph Collection hotel, in the former Penthemont Abbey (7 th ). A subsequent wave will include openings of the Kimpton (boulevard des Capucines) and the Elegancia in the soon to be redeveloped La Poste du Louvre building. Finally, the Accor Group has plans for development of a five-star So Sofitel on the Champs-Élysées by While luxury hotel openings do not always have a direct impact on the retail market, the knock-on effects are sometimes significant. For example, the Mandarin Oriental, created in 2011, has directly contributed to the upmarket trend of the rue Saint-Honoré, now Paris s most dynamic high street. Rue Saint-Honoré was the site of 18% of all luxury openings in Paris during the period , ahead of avenue Montaigne (12%) and rue du Faubourg Saint-Honoré (12%). The opposite is true for the sector Sèvres/Grenelle/Saint-Germain. The closing of the Lutétia for remodelling since 2014 has coincided with an unequivocal slowdown in upscale retail openings after an exceptionally lively period (Hermès and Ralph Lauren in 2010, Céline in 2011, Louis Vuitton in 2012, Berluti in 2013, etc.). A LARGE POOL OF NEW RETAILERS The arrival on the Paris hotel scene of new operators is a clear sign of the city s attractiveness. The arrival of new foreign retailers is also a good indicator of the retail market s solid health. However, though Paris remains one of the world s major destinations, the number of foreign newcomers has slowed significantly since the heavyweight arrivals at the end of the 2000s and beginning of the 2010s (Uniqlo in 2007, Apple in 2009, Calzedonia in 2010, Abercrombie & Fitch in 2011, etc.). While a few large players have arrived since (Five Guys in 2016 on the Champs-Élysées), several have closed their flagships, such as Virgin and, more recently, Marks & Spencer and Banana Republic on the Champs-Élysées. These closings are in no way a sign of decline in the attractiveness of Paris s prime shopping districts. Rather, they are the consequence of problems specific to retailers, and reflect a more fundamental change in the retail market: numerous retailers are revising their expansion strategy in order to adapt their networks of stores to new ways of shopping and to the growth of e-commerce. This has led to a heightened rate of closings and openings among retailers, a significant trend in the retail market which affects not only secondary locations but also prime ones. This change does not call into question the need for retailers to have large flagship stores. To the contrary, the greater number of disposals on some of the best high streets gives retailers the opportunity to enter or expand more easily and quickly in the French market. The flagship model is still going strong. It remains essential for the brick-and-mortar growth of large retailers, while they simultaneously expand their footprint on the internet. 7

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9 RETAIL 9 Retailer demand for the most desirable locations in Paris will always be high now more than ever, as newcomers and new types of retailers begin to enter the French market. Proof is easily seen in large cities in Europe and worldwide, where retailers are expanding rapidly. Those same retailers are still absent from the Paris market. Among the highest-profile openings recently have been Arkett (the latest brand from the H&M Group) in London, Munich, Brussels and Copenhagen. Also in London, Reserved has opened on Oxford Street, and Canada Goose on Regent Street. In Amsterdam, Under Armour has opened its first flagship in Europe. In addition to these openings, lesser-known retailers from emerging countries often the sources of significant numbers of tourists have arrived. For example, Line Friends has opened its first store outside of Asia, in New York on Times Square. To varying degrees, industrial groups and pure players (e.g. Microsoft, Amazon, Smeg, Sonos) have also entered brick-and-mortar retail. A MORE ADVANTAGEOUS REGULATORY CONTEXT Data from the Ministry of the Economy in early 2017 show a significant increase in Sunday openings in most Paris ITZs. The entry into force of the Macron law is clearly a new asset for Paris, which is in fierce competition with other European cities to attract foreign tourists. After a long period of uncertainty, Paris now provides large international groups a more stable and understandable regulatory framework. In recent months, new agreements have been concluded within large groups and by various branches, particularly fashion retailers. Department stores now have the right to stay open 7/7. This has been the case for Galeries Lafayette Haussmann and Bon Marché since January 2017, for Printemps Haussmann since June 2017, and for BHV (the first to open on Sundays) since July The additional opening time has had a positive effect on business. For BHV, Sunday openings have resulted in 10% growth in annual sales, and they have boosted other retail activity in the immediate neighbourhood. Change in Sunday opening rates in various Paris neighbourhoods ITZ September 2016 January 2017 Le Marais 48% 71% Les Halles 27% 48% Rennes - Saint-Sulpice < 10% 14% Saint-Honoré - Vendôme < 10% 16% Saint-Germain < 10% 18% Average of Paris ITZs 21% 27% Source: Observations on retail in International Tourist Zones, Direction générale des Entreprises, 2017.

10 10 Timeline of retail projects in Paris since the 1970s Italie 2 / Galerie Gaîté-Montparnasse Forum des Halles / Beaugrenelle Forum des Halles (extension) Les Trois Quartiers Passy Plaza / Carrousel du Louvre 1993 Bercy Village Passage du Havre Citadium Caumartin Gare du Nord Galerie Lafayette Maison 2007 Gare de l Est Beaugrenelle (extension-redevelopment) Gare Saint-Lazare / Gare de Lyon Galeries Lafayette Maison & Gourmet (refurbishment) Le Printemps Carrousel du Louvre Halle Secrétan Galeries Lafayette Haussmann (Shopping & Welcome Centre) Printemps Haussmann (refurbishment) La Grande Épicerie de Paris (rue de Passy) Le Bon Marché (refurbishment-extension) BHV Marais (refurbishment) Marché Saint-Germain (redevelopment) Forum des Halles (extension-redevelopment) Vill Up / Former Macdonald warehouse Shopping centres Retail developments in train stations Department sores Source: Knight Frank

11 RETAIL A NEW MILESTONE IN THE HISTORY OF PARIS RETAILING 11 After an intense 2016 and 2017 (e.g. the redevelopment of the Marché Saint-Germain and the refurbishment-extension of the Forum des Halles), the grand openings of new retail projects are not expected to decline. The end of the 2010s into the early 2020s could mark an important new stage in the history of Paris retailing. A few milestones in this history are described below. Their influence is still felt in retailing activity and customer flows in Paris. An historical overview places future Paris retail projects in a long-term framework, and reflects how Paris retail constantly adapts to changes in distribution and consumer behaviour. After the opening at the end of the 1970s of Italie 2 and especially the Forum des Halles which brought to fruition one of the grand projects of the Pompidou era the 1980s were relatively quiet. However, in 1986 the Forum des Halles was extended by 12,000 sq. m, and a few retailers opened which would change the history of Paris s main high streets, such as the Virgin Megastore on the Champs-Élysées in The 1990s brought new arcades and shopping centres to Paris. The Trois Quartiers (1991), the Carrousel du Louvre (1993) and the Passy Plaza (1993) were opened first, then came the Passage du Havre in Bercy Village was opened in 1998, along with the UGC multiplex, bringing new energy to quiet eastern Paris. Three of these shopping centres the Carrousel du Louvre, the Passage du Havre and Bercy Village alone account for slightly more than 40 million visitors per year, or as many as Les 4 Temps at La Défense, Europe s most-visited shopping centre (with Westfield Stratford in the United Kingdom). Several secondary zones have developed as new Paris neighbourhoods have been created. The Rive Gauche ZAC (designated development zone) has seen more than 50,000 sq. m of retailers and restaurants opened since the end of the 1990s (Décathlon, H&M, Prêt à Manger, etc.). In the north-eastern part of Paris, 30,000 sq. m have been opened in the former Macdonald warehouse (Leroy- Merlin, Leclerc, Décathlon, etc.). In 2016, the 24,000 sq. m shopping centre Vill Up opened in La Villette. Other projects will be finalised in the years to come. More than 20,000 sq. m of retail and leisure space will be made available by the Clichy-Batignolles ZAC residential and tertiary offer in the 17 th. There is another trend, first observed at the beginning of the 2000s, which has accentuated since the beginning of the 2010s and will continue into the early 2020s: retail development in train stations. After the Nord, Est and Saint-Lazare train stations, new developments are planned for in the Montparnasse (19,000 sq. m of retail space) and Austerlitz (12,500 sq. m) stations. These projects are representative of the significant growth of retail space. Train stations offer large retailers an opportunity to expand their networks and to enjoy the high margins that travel retail provides. The growth of Paris retail stock began to slow at the beginning of the 2000s. Instead, existing space was redeveloped and upgraded, in order to adapt to new modes of consumption. The refurbishment of the Forum des Halles, the redevelopment of Beaugrenelle and the Marché Saint-Germain, and the 27,000 sq. m of Gaîté-Montparnasse to be delivered by 2020 all respond to a dual need to improve supply and to enhance Paris s prime shopping districts. Department stores are also part of this trend. Like the Printemps Haussmann, all department stores have carried out major renovation and extension work in order to attract international customers. For the past few years, the development of Paris retail stock has been focused on other neighbourhoods.

12 12 Avenue des Champs-Élysées, Paris 8 th

13 RETAIL OUTLOOK FOR CHANGE IN PARIS S MAIN SHOPPING DISTRICTS 13 CHAMPS-ÉLYSÉES Change in continuity After more than 15 transactions made since the beginning of 2016, the Champs-Élysées will definitely be getting a makeover in the months to come. Several deals and redevelopment projects are already under way: for example, 2,800 sq. m of retail space at no. 50 (former Gaumont cinema) and 1,500 sq. m at no. 123 (former Clément and Dinh Van). Hotels and cinemas are also planned (So Sofitel, MK2), allowing the Champs-Élysées, in addition to its retail function, to retain a mix of tenants and to be a destination for leisure and entertainment for Parisians and tourists alike. However, development projects under way and lettings in recent months do not suggest that a retail revolution has arrived on the Champs-Élysées. Rather they reinforce the avenue s status as an international showcase. There have been several deals for the relocation or expansion of flagships already on the Champs-Élysées: Nike in 4,500 sq. m at no. 79, the Adidas expansion at no. 22 (former Banana Republic), the relocations of L Occitane/Pierre Hermé Paris to no. 86 (former Promod) and of Weston to no. 55 (former LCL agency). Meanwhile newcomers are reinforcing the mid- and high-end positioning of the Champs-Élysées. Five Guys opened at the end of 2016 at no , Citadium opened at no. 65 (former Tommy Hilfiger), Kiko will have its largest European flagship at no. 102 and Apple will be at no take shape over such a short period. In addition, while the valuation gap between the two sides of the Champs- Élysées has closed somewhat, values are expected to remain between 13,000 and 15,000 /sq. m/year Zone A (1) for the best locations on the odd side, and to remain around 20,000 /sq. m/year on the even side. A few recent transactions have hiked prices for top slots, but without effecting inflation across the board. IN SHORT Prime rental values at Q ,000 20,000 /sq. m/year (Zone A) Next important openings Nike, Kiko, L Occitane, Apple, Galeries Lafayette, Chanel Beauté, Dior Parfums Redevelopment projects No (So Sofitel, MK2), no. 50 (former Gaumont cinema, 2,800 sq. m of retail space), no. 123 (1,500 sq. m of retail space), no. 118 (departure of Mercedes, 990 sq. m of retail space) Transformation index (scale of 1 to 10) 6 While luxury goods have always been at home on the Champs-Élysées (from Fouquet s to the Louis Vuitton flagship opened in 2005), other deals will up the ante even further. This trend has been observed since 2013, with openings and lettings by Tiffany & Co., Dubail, Tag-Heuer, Chanel Beauté and Dior Parfums, and with refurbishments carried out by Cartier and Montblanc. The opening of Galeries Lafayette planned for the first half of 2019 will enhance this change, while the expansion of several French retailers (Maje, Zadig & Voltaire, Repetto) will bring a trendier note to the Champs-Élysées. The level of prime rental values on the Champs-Élysées is not expected to change significantly. Retailer demand for a well-located flagship remains steady and should contribute to the absorption of rising supply. What is unusual is the unprecedented volume that will become available if all redevelopment projects (1) Rental value: rent + disposal (lease right/goodwill) decapitalized.

14 14 Openings of luxury stores in Paris, by street/shopping district, Source: Knight Frank 21% 18% Rue Saint-Honoré 4% 6% 12% Avenue Montaigne Faubourg Saint-Honoré Place Vendôme / rue de la Paix Sèvres / Grenelle / Saint-Germain 7% 9% 11% 12% George V / François 1 er Marais Champs-Élysées Other

15 RETAIL THE HEART OF PARIS LUXURY The rue Saint-Honoré extends its borders After a growth spurt in the early 2010s, attributable partly to the boom in Chinese consumption, the global luxury market contracted in 2016, after the terrorist attacks in Europe, and because of economic and political difficulties in certain emerging countries. In 2017, the luxury market revived, with sales up 5% year on year (+6% in Europe (2) ). This change in momentum was due to Chinese customers, to a rise in spending by millennials and to growth in e-commerce (+24% in 2017, compared with +8% for in-store retail). By 2020, the luxury market should experience annual growth of between four and five percent. Paris will benefit from favourable trends, such as the tendency of major luxury groups to focus on the largest global markets, to the detriment of secondary markets. The consolidation trend in established markets will likely also apply to Paris, where the most prestigious retailers continue to favour a few streets on the Right Bank which form the historic heart of Paris luxury. The rue Saint-Honoré will likely see its new status confirmed with the arrival of high-profile projects. The recently opened Louis Vuitton flagship, widely covered by the media, provides the perfect illustration of the trend for luxury groups to focus their efforts on a limited number of large, ideally located maisons. With their artistic cachet, these flagships provide an increasingly sophisticated shopping experience and will increase the street s attractiveness. The Louis Vuitton flagship reinforces the street s upmarket trend, which will be further enhanced by the long-awaited opening of Chanel at the corner of rues Cambon, Duphot and Saint-Honoré, the opening of the Dior flagship, and the arrival of Saint Laurent in the former Colette space. The closing of the concept-store will have an effect on the street s identity. While its positioning could change, the expansion of the Hôtel Costes, for which work is under way, will only enhance the street s already trendy reputation. It is important for the rue Saint-Honoré to retain this trendy image, which distinguishes it from more exclusive, traditional streets on the Right Bank. This image could add to its success with younger customers, generations Y and Z, who are key to future growth in the luxury market. The historic heart of the Right Bank (place Vendôme, rue de la Paix, rue du Faubourg Saint-Honoré, avenue Montaigne) is expected to be less dynamic. This is true first because the rue Saint-Honoré enjoys a growing share in demand from large luxury retailers and has become a major competitor for nearby streets, such as rue de la Paix. Second, the opportunities for creations are very rare there, with newcomers arriving only occasionally (Balenciaga on avenue Montaigne). In confirmation of a trend observed now for many years, Paris s historic luxury high streets will see mainly relocations, refurbishments and expansions of existing flagships (Dolce & Gabbana on rue du Faubourg Saint-Honoré and on avenue Montaigne). While a few creations ex nihilo of the most prestigious brands will be grouped around prime retail locations, other areas will welcome retailers less known or less exclusive. The Faubourg Saint-Honoré provides the best example. While the area between the rue Boissy d Anglas and the rue Royale will remain the principal hunting ground for a small number of large brands, other brands will continue to search for locations around the Bristol. In this sector, where Cifonelli, Baccarat and Thierry Mugler have opened since 2015 and where Christian Liaigre is expected soon, opportunities are often enhanced by the presence of art galleries in the area. There are also benefits from being near the Splendide Royal, a five-star hotel which opened a few months ago in this area close to the Élysée Palace, where presidential security measures weigh on retail activity. IN SHORT Prime rental values at Q ,000 15,000 /sq. m/year (Zone A) Next important openings Dolce & Gabbana on avenue Montaigne (extension), Chanel on rue Saint-Honoré, Dior on rue Saint- Honoré, Saint Laurent on rue Saint-Honoré, Boucheron at place Vendôme (refurbishment) Redevelopment projects 26 bis 32 rue François 1 er (former Europe 1, 1,000 sq. m of retail space), former Canadian Embassy. Other: extension of Hôtel Costes Transformation index (scale of 1 to 10) 5 (2) Source: Bain & Company 15

16 16 SAINT-GERMAIN / SÈVRES / GRENELLE What s new on the Rive Gauche? Although still a prime location, the Left Bank s Golden Triangle, comprising parts of boulevard Saint-Germain, rue de Grenelle and rue de Sèvres, is trying to get its second wind. The upscale trend has paused since numerous openings at the beginning of the 2010s (Hermès and Berluti on rue de Sèvres, Louis Vuitton in Saint-Germain des Prés, Ralph Lauren on boulevard Saint-Germain and Céline on rue de Grenelle). Few luxury retailers have moved there since, except a few exclusive projects such as the Steinway & Sons showroom at 230 boulevard Saint-Germain. This absence of movement may indicate that luxury brands no longer find the neighbourhood attractive, although many designers and upscale retailers (Vanessa Seward and Fusalp, boulevard Saint-Germain) continue to move there. However, the success of Le Bon Marché, now open 7/7 and owned by LVMH, offers proof that luxury goods still have their place in Saint-Germain. Perhaps that is why the number of luxury shops has declined. By improving its product offer after major renovation work, Le Bon Marché has moved significantly upscale and now provides the largest brands with a serious alternative to the best shopping districts of the Left Bank. Finally, the decline in the number of luxury shop openings has coincided with the Lutétia s closing for renovation. This has further reduced a high-end hotel supply which was already relatively low. Luxury retailers and hotels go hand in hand, so the reopening in 2018 of this mythical Left Bank hotel could have a significant impact on the neighbourhood. The Lutétia will provide a more contemporary showcase, one that is likely to meet the tastes of tourists already familiar with the neighbourhood. Yet it could also attract long-time clients of Right Bank palaces. Other hotel projects will enhance the neighbourhood, such as the one planned at 40 rue des Saints-Pères. In addition, two long-awaited projects could on their own help revive the Left Bank luxury market, if they are able to attract strong brands: the installation at 165 boulevard Saint-Germain of an LVMH retailer (LVMH bought the building three years ago); and the letting of the former Banque de France building at 48 boulevard Raspail. On a less high-end segment, news in the Left Bank retail market has been dominated by the reopening of Marché Saint-Germain, after its redevelopment by Banimmo. This retail site of 4,600 sq. m has allowed a few international retailers which had little or no footprint on the Left Bank to open large stores (Uniqlo, Apple). Since the project s grand opening a year ago, the effects on nearby streets are still difficult to measure. Several midrange and upscale retailers have opened in the neighbourhood, including single-brand stores (Le Coq Sportif, Fusalp, Samsonite), French and international newcomers (Scalpers, Jott) and fast-food chains (Chipotle). Other deals under way (rue Bonaparte, rue Saint-Sulpice, etc.) are not expected to upset the fundamentals of a sector which, while still sought after by retailers, remains stable. IN SHORT Prime rental values at Q ,000 6,000 /sq. m/year (Zone A) Next important openings 165 boulevard Saint-Germain (LVMH, former Infinitif) Redevelopment projects Former site of the Banque de France at 48 boulevard Raspail (more than 1,000 sq. m of retail space) Other: Reopening of the Lutétia, and a new luxury hotel at 40 rue des Saints-Pères Transformation index (scale of 1 to 10) 3

17 RETAIL MADELEINE / CAPUCINES The prestige of the Madeleine restored The brief adventure of the Pinacothèque, opened in 2007 and closed in early 2016; the abandoned C&A flagship, opened in 2014 and designed to revive the retailer, but closed after less than three years; the uncertainty around the future of Hédiard and its most famous store... Despite its ideal location, as recently as a few months ago the Madeleine was still saddled with a reputation for struggling projects. Today, however, it seems to have recovered and now holds all the cards to restore its former prestige. The Madeleine, which until 2019 will undergo work to improve traffic circulation planned by the city as part of its redevelopment of the city s seven major places, will initially benefit from the ambitions of Fauchon. The retailer is a guarantor of the neighbourhood s identity, which dates back to the nineteenth century. At the end of 2016, the Fauchon shop reopened after major refurbishment. In 2018 it will open its first five-star hotel, at the corner of boulevard Malesherbes. The Madeleine s speciality of high-end food retailers will be reinforced by the reopening of Hédiard and the arrival of Café Pouchkine, which leapt at the opportunity presented by the departure of Orange. Café Pouchkine can now attach its name to that of the famous square. far from complete, the area will retain its mixed-use positioning. This suits a neighbourhood frequented by Parisians and international tourists alike. The district is located a stone s throw from the principal luxury shopping districts and the Opéra, and it is here that some retailers achieve some of their best performances. A good example of this diversity is the planned installation in 2018 of a Leroy-Merlin store at the site of the former Palacio garage. The DIY s arrival will complete the area s household goods offer (Darty, Boulanger, Zara Home). Similar to the Boulanger store opened in 2015 on boulevard des Capucines, Leroy-Merlin will develop an urban, connected concept adapted to the neighbourhood s active residents. The boulevard des Capucines has largely completed its transformation. Along with the arrival of several mass-market retailers (Five Guys at the former site of the Chez Clément restaurant), the upmarket trend observed since the beginning of the 2010s (Bucherer, Tag-Heuer, Cartier, Montblanc) does not appear ready to gather speed in the coming years, with the exception of a new InterContinental hotel the first Kimpton in France slated to open in Fauchon, place de la Madeleine, Paris 8 th To add to their footprint in Paris, less-upscale retailers have taken advantage of the supply of medium-sized and large spaces. A part of the Pinacothèque has been let to Prêt à Manger (11 rue de Sèze), while another part has gone to Reebok for a boutique and gym (12 boulevard de la Madeleine). There remain 1,500 sq. m to let at the former private museum (28 place de la Madeleine), in addition to the 6,000 sq. m of the former C&A flagship at 23 boulevard de la Madeleine. The quality of these locations and the negotiations under way foreshadow other significant openings. Although the Madeleine s transformation is IN SHORT Prime rental values at Q ,500 4,000 /sq. m/year (Zone A) Next important openings Café Pouchkine, letting of 23 boulevard de la Madeleine (former Madelios and C&A, 6,000 sq. m of retail space), letting of 28 place de la Madeleine (former Pinacothèque, 1,500 sq. m of retail space), Leroy-Merlin, Hédiard (reopening) Other: Hôtel Fauchon, Hôtel Kimpton, roadwork by the city of Paris as part of its plan to improve traffic flow around Paris s seven major places Transformation index (scale of 1 to 10) 6

18 18 LE MARAIS The place to be As one of Paris s most popular neighbourhoods, the lively Le Marais is well worth a visit. Its successfully trendy positioning is hardly new. Years ago a few pioneering concept stores (L Eclaireur, Fleux, Home/Bensimon, etc.) established the area s reputation as a trendsetter, an image reinforced in recent years. Despite the occasional closing, several major accessible luxury brands (e.g. The Kooples, Maje and Zadig & Voltaire) have firmly established themselves in the neighbourhood. Fast-fashion has also been active (Uniqlo in 2014 on rue des Francs-Bourgeois, after COS on rue des Rosiers and before Weekday and & Other Stories on rue Vieille du Temple). Newcomers (Scalpers, Hipanema, Supreme), single-brand stores (K-Way, Rains, Petit Bateau) and pop-up stores (Kenzo, Chanel) have also proliferated, a sign of the strategic importance of Le Marais as marketing tool. However, this change is by no means limited to the fashion sector. Le Marais has also become a pilgrimage destination for aficionados of high-end cosmetics and of the latest food concepts. The next few years will bring a greater variety of retailers to a neighbourhood expected to remain very trendy. Figures published recently by BHV confirm the soaring internationalization of the Le Marais clientele. If in 2013 foreign tourists accounted for only 6% of sales, today they account for 18%, a figure that could reach 35% by This growth feeds and sustains the strong demand of retailers for this shopping district in the heart of Paris, with its extraordinary architectural heritage. Some streets are more sought after than others. At the top of the list are rue des Francs-Bourgeois and rue Vieille du Temple. The large number of openings in the past two years Chanel Beauté at no. 40, Petit Bateau at no. 6, Lancel at no. 43, Frederic Malle at no. 13 (formerly MAC, which has moved to no. 21), Nespresso at no. 29, etc. provide sufficient proof of retailer appetite for the rue des Francs-Bourgeois. This appeal should underpin the redevelopment of the Hôtel de Coulanges at no , a seventeenth-century complex earmarked by the Reinvent Paris competition to become by 2019 a space dedicated to fashion and design, with coworking spaces and designer concept stores. On rue Vieille du Temple the list of openings, both recent and to come, is just as long: Labonal at no. 11, Maxime Simoens at no. 13, Weekday at no. 121 and & Other Stories at no. 76/76 bis, Grom at no. 16, Bobbies at no. 79, Hipanema at no. 99, etc.). However, the news has been dominated recently by the sale of the Hôtel Amelot de Bisseuil at no. 47. While a Chanel pop-up has been there these past few months (and it is rumoured that it could become permanent), in 2018 this architectural gem will also become a luxury hotel with spa and restaurant. Rue des Rosiers, Paris 4 th

19 RETAIL Turning to the rue des Archives, the luxury sector moved in with great fanfare in (Givenchy, Moncler, Fendi, Gucci and Valentino), though there have been no openings as high-profile since then. The most recent deals have been for less exclusive brands usually confined to the bottom end of the street, near BHV (John Galliano). The ongoing, measured move upmarket is predictable and limited in its geographic boundaries. The trend will promote the opening of a new luxury hotel on the corner of rue de la Verrerie, following the acquisition by Xavier Niel and the Pariente brothers of the Villa Mazarin. The growing popularity of Le Marais with the young, international crowd, whose tastes are increasingly diverse and sophisticated, is also a factor in the upscale trend. The dynamic momentum of rue des Archives could extend further north albeit less upscale after the redevelopment of the Cœur Marais office complex and the opening of a WeWork coworking space of 7,000 sq. m. The retail geography of Le Marais will not be completely redrawn, but could be changed nonetheless. Rue Sainte-Croix de la Bretonnerie will likely rise in the neighbourhood s hierarchy of principal shopping streets. Less sought after until the beginning of the 2010s because of retailer demand focused on just a handful of streets (Francs-Bourgeois, Vieille du Temple, Rosiers), the street saw several openings between 2012 and 2015, such as Diesel and Levis at no. 21 and Casio at no. 5. But it was the arrival in 2015 at no. 20 bis of a Nature & Découvertes flagship of 500 sq. m that attracted attention and unveiled the street s potential. With a supply of the kind of opportunities which are now hard to find in other prime areas of Le Marais, and its proximity to the Le Marais buzz, the rue Sainte-Croix de la Bretonnerie is set to receive confirmation for two of the neighbourhood s most longawaited development projects: first, a cultural project to be opened in 2018 by the Fondation des Galeries Lafayette in an industrial building on rue du Plâtre, redeveloped by the famous architect Rem Koolhas; and second, the opening, by the beginning of 2019, of the first large-scale food store in France from the retailer Eataly, with 2,400 sq. m of retail space proof, if any more were needed, that rue Sainte- Croix de la Bretonnerie is now fully integrated in the Le Marais shopping circuit. Over time the street will become the backbone of the neighbourhood. By linking the historic streets of Le Marais (rue Vieille du Temple, rue des Rosiers) to rue des Archives, rue Sainte-Croix de la Bretonnerie thus connects with another sector, Beaubourg/ Les Halles, itself in full bloom since the redevelopment of the Forum and the surrounding area. The potential of the Haut-Marais is not as easy to predict. Described for years as the natural expansion zone for retailers already in Le Marais, or for brands seeking Le Marais image but without the price tag, the Haut-Marais has so far seen few large openings. This part of the neighbourhood is home mainly to concept stores, pop-up shops and harder edged fashion retailers. However, a few more or less recent events, such as the refurbishment of the place de la République, the new Carreau du Temple and the ambitious reactivation project of the Jeune Rue (i.e. the Vertbois project) since its recent purchase by Rockspring, could attract the interest of retailers for the area. IN SHORT Prime rental values at Q ,000 4,500 /sq. m/year (Zone A) Next important openings Eataly, & Other Stories Redevelopment projects Hôtel de Coulanges, Hôtel Amelot de Bisseuil Other: Lafayette Anticipations, Hôtel Evok, projet Vertbois (former Jeune Rue ) Transformation index (scale of 1 to 10) 6 19

20 20 INTERVIEW Citynove: a major player in the revival of Le Marais Knight Frank: What development projects is Citynove working on in Le Marais? Citynove: Citynove, the property company of Galeries Lafayette Group, manages around 800,000 sq. m in France, including 70,000 sq. m in Le Marais alone. Étienne Tabareau Citynove Deputy General Manager Romain Labbé Citynove Director of Architectural Identity Knight Frank: It has been more than a year since the BHV Marais began opening on Sundays. How have the department store s results been affected by Sunday openings? Citynove: The impact has been very positive in terms of sales and image. The store s Sunday openings are an extension of prior change in certain parts of the neighbourhood, particularly the areas around Francs Bourgeois and rue des Rosiers, which have been open on Sunday for some time now. BHV Marais customers quickly grew accustomed to shopping on Sunday, which soon became the second-biggest day of the week, after Saturday. As a major player in Le Marais, Citynove has been active for more than six years in an urban renewal project designed to link the original BHV Marais store on rue de Rivoli with the future Fondation Galeries Lafayette on rue du Plâtre. This project began by revitalising the BHV Homme courtyard, called La Cour Bleue, where we installed food kiosks and the first 3D printing service in France. This was done to create a meeting place for neighbourhood residents and visitors to Le Marais. La Cour Bleue is currently transitioning into Cour Rose. It opens onto rue du Temple with La Forêt Bleue, an artwork by Ulla von Brandenburg which we installed in We then had English architect Jamie Fobert refurbish five stores on the rue des Archives. Today these stores are home to the prestigious brands of Givenchy, Moncler, Fendi, Gucci and Valentino. The elegant windows of these boutiques follow the rhythm of the façades and are in harmony with neighbourhood s historic buildings. These actions mark the first step in a progressive makeover of the courtyards between rue de la Verrerie and rue Sainte-Croix de la Bretonnerie. Open to the public, these courtyards will lead to a building of 4,000 sq. m currently under redevelopment by DATA Architectes. The building will house Eataly Marais, with a little over 2,400 sq. m of retail space. Eataly, the largest Italian marketplace in the world, will open its first store in France at the former site of the Menier chocolate company. The complex will be a lifestyle space combining restaurants and an upscale market of fine Italian food products. Access will be via the rue Sainte-Croix de la Bretonnerie in the Fondation Galeries Lafayette. Founded in 2013, Lafayette Anticipations (the Galeries Lafayette corporate foundation) will move into a nineteenth-century building at 9 rue du Plâtre. For the redevelopment of this industrial building, we and Lafayette Anticipations have worked with OMA, internationally acclaimed architect Rem Koolhaas s agency, which will install a metal structure 18 metres high in the courtyard of the existing building. Equipped with

21 RETAIL motorised adjustable floors, the structure can be configured for the various activities of Lafayette Anticipations. The opening of Lafayette Anticipations in the spring of 2018, and the grand opening of Eataly in early 2019, constitute the project s final stages. Afterwards we ll move on to our latest ideas for Le Marais... Knight Frank: In your view, what is so special about Le Marais, compared with other prime Paris sectors? To what extent can the neighbourhood be preserved? Citynove: The richness and appeal of Le Marais lie in its very diversity. It is precisely this meandering quality that makes the neighbourhood such a fascinating place to walk. While aimlessly wandering around Le Marais it is still possible to stumble upon boutiques, food shops, restaurants, art galleries even traditional workshops. We are designing just such a unique pathway through our development projects for historic buildings. Take rue Sainte-Croix de la Bretonnerie, with rue Rambuteau one of the major east west axes leading into Le Marais. The street s commercial potential will rise significantly with the arrival of Eataly Marais in the building we are developing at no. 37, and with the second entranceway for the Lafayette Anticipations building, across the street at no. 44. Adjacent streets, especially rue du Temple, should also benefit. This will definitely be the case for rue des Archives. The Cœur Marais project, in which WeWork will open coworking space and which, incidentally, was developed in the old headquarters of Cofinoga (formerly Galeries Lafayette Group) has reopened to the public the Sourdis alleyway linking rue Charlot with rue Pastourelle. 21 Future Eataly store, rue Sainte-Croix de la Bretonnerie, Paris 4 th

22 22 RIVOLI A time for major operations After enduring years of business slowdown, the Samaritaine closed in 2005, opening a long period of uncertainty that would have a profound effect on the rue de Rivoli. The scale and duration of refurbishment necessary for the Samaritaine, in addition to the colossal redevelopment of the Forum des Halles, unsurprisingly weighed on the district s retailers. The closing of the Samaritaine altered the flow and profiles of consumers, worsened the problems faced by independent shops, and accelerated the openings and closings of retailers. After a few spectacular closings (Go Sport in 2006), several large and medium-sized properties were let towards the end of the 2000s... before promptly returning to the market. This suggested that the rue de Rivoli was on the decline. But, while several large retailers closed (Adidas, Etam) on the rue de Rivoli, some did so solely within an arbitrage framework unrelated to the street s qualities. Examples are Jack Wolfskin, Desigual and Esprit which, in just a few years, sold several of its Parisian flagships (Champs-Élysées, rue de Passy, place des Victoires, rue des Rennes, etc.). However, several of the sites were rapidly re-let (e.g. a store of 1,300 sq. m opened by Mango in 2013 in the former Esprit space at 146 rue de Rivoli). 74 rue de Rivoli, Paris 4 th After the completion of work of the Forum des Halles, and with the reopening of the Samaritaine fast approaching, the return to grace of the rue de Rivoli seems to be accelerating. This change is logical, for the centrally located street has numerous advantages: it lies in the heart of the greater Paris public transport network, and it is near several of Paris s most famous tourist attractions (Musée du Louvre, Centre Pompidou, Cathédrale Notre-Dame). The area around BHV is already lively because of the department store, now more upscale and opened on Sundays. Unsurprisingly it is this part of the street that has the highest rental values. However, the rue de Rivoli is also coming back to life near the Samaritaine. Many deals have been made

23 RETAIL in recent months, including the opening of a new Rituals shop at no. 57, and especially the expansion of international fast-fashion giants. Present in the area since the 1980s (e.g. C&A), fast-fashion giants have become even more visible with the flagships of H&M (1998), Zara (2003), Esprit (2007) and Forever 21 (2013). In recent months they have built up their networks. The Inditex Group has placed Bershka and Pull & Bear at no. 65, the former Celio and Jennyfer. Their next openings will give the street a trendier feel, with a Monki (H&M) flagship of 600 sq. m at no. 128 (former Bershka), and the first Urban Outfitters in France at no. 146 (former Desigual). Yet the most important deals to come are mainly for high-end projects. In 2019, the new Samaritaine will house a large DFS store, the luxury travel retail leader. This will be DFS s second store, after the first one opened in Venice in The Samaritaine will also feature a Cheval Blanc palace (72 rooms). Because of the specific nature of the DFS concept duty-free shopping for foreign tourists this project may remain disconnected from the rest of the rue de Rivoli, whose positioning would remain more mass-market and focused on the growth of fast fashion and the new Forum des Halles. However, several elements cast doubt or at least raise questions about this outlook. For one, a Chanel Beauté boutique is due there soon. If the luxury footprint is to extend beyond the Samaritaine, it is also because other large projects are near completion and located not far from the department store. The first is the redevelopment of the Poste du Louvre which, in 2019, will house upscale retail shops and a five-star Elegancia Hotel. Halfway between the Poste du Louvre and the rue de Rivoli is the Bourse du Commerce, chosen by François Pinault the other French luxury magnate to house his collection of contemporary art, starting in In addition, near the Louvre the momentum is expected to continue beyond 2020, with the redevelopment of the Louvre des Antiquaires by SFL. The reinforcement of the mass-market positioning of the Rivoli/Forum des Halles sector (opening of flagships of large fashion retailers, refurbishment-extension of the shopping centre) and the move upscale (reopening of the Samaritaine, redevelopment of the Poste du Louvre and the Louvre des Antiquaires, Fondation Pinault) together announce an upheaval of retail in the enlarged area around the rue de Rivoli. This profound renewal of retail supply could reaffirm the success of Le Marais and revive nearby neighbourhoods such as Etienne Marcel/place des Victoires, in search of a second wind for several years now. This unprecedented tightening of the links between these various areas could ultimately result in a shopping district which is denser and more consistent, in the very heart of Paris. IN SHORT Prime rental values at Q ,000 4,000 /sq. m/year (Zone A) Next important openings DFS, Urban Outfitters, Monki, Chanel Beauté Redevelopment projects Samaritaine, Poste du Louvre, Louvre des Antiquaires Other: Bourse du Commerce (Fondation Pinault), Hôtel Cheval Blanc Samaritaine, roadwork to reduce traffic in Paris Transformation index (scale of 1 to 10) 8 23

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25 RETAIL OTHER PRIME SECTORS A few ideas to explore 25 RUE DE RENNES: The coming years should reinforce the higher end of the street, already the busiest portion. The rue de Rennes will benefit from work done at the Montparnasse train station, even though demand by large retailers may focus on the 19,000 sq. m of retail space developed by Altaréa inside the station. Traditionally the more upscale part of the street, the lower end of the rue de Rennes will have to confront the refurbished Bon Marché and a part of the rue de Sèvres no doubt rejuvenated by the reopening of the Lutétia. The RUE DE PASSY is not expected to undergo significant change. However, it has a bright future. The rue de Passy will benefit from the recent openings of attractive retailers (Rituals at no. 52, L Occitane at no. 54, Uniqlo in Passy Plaza in 2018), and it will get an even more significant boost from the opening of the Grande Epicerie (former Frank et Fils) at no. 80. The next few years will bring several large openings to the BOULEVARD HAUSSMANN sector. First in size is the new H&M store of more than 5,000 sq. m at 1 3 rue Lafayette, in addition to the Etam store of approximately 500 sq. m on rue Halévy. Although not yet official, the project seems confirmed for the installation of a European Union institution at no. 51 (former Benetton flagship). This could have an impact on retail in the sector, the heart of one of Europe s densest retail hubs because of the long-time presence of department stores, which have largely completed their transformation. Several ambitious refurbishments and the opening of a concept specifically for Chinese visitors (former Surcouf) have further accelerated their move upscale. They are now open 7/7 in order to better attract foreign tourists.