This year’s high-turnover pre-Christmas period is again proving promising for most Swiss retailers. Both e-commerce and brick-and-mortar stores generated record daily sales in the two days leading up to the first Advent day (including Black Friday and Cyber Monday). According to card and online payment figures from Monitoring Consumption, turnover in the first 10 days of Christmas sales (from Black Friday) was up 2 percent in nominal terms compared to the same period last year. The increase in retail volume can be attributed to several factors: first, consumer prices are 3 % higher on average than last year. Second, the population has grown at an above-average rate this year. And thirdly, the very stable labor market is creating confidence in job security and a rise in wages for many sectors.
Christmas business boosts sales by at least 40 percent
Pre-Christmas sales have always generated by far the greatest turnover for retail stores. Before the pandemic, retail sales (both food and non-food) in December were more than 40 percent higher than the average from January to October. In 2021, December was even more important in terms of retail sales than in previous years. In the run-up to this Christmas, the goods categories with the sharpest sales increase are typically sports equipment, toys, books, and clothing and shoes.
Black Friday a record day in many respects
In the two sub-sectors of the retail trade –– e-commerce and physical stores –– the Christmas period unfolds to different degrees. While e-commerce sales skyrocket to their highest point during discount days such as Black Friday and Cyber Monday, the most money spent in brick-and-mortar stores is on the four Saturdays leading up to Christmas. In recent years, traditional retail has achieved its highest sales on December 23.
Pedestrian frequency in city centers on the rise again
Given the ongoing trend of digitalization and an increase in online shopping, the question arises as to whether brick-and-mortar retail will continue to benefit from the Christmas trade –– in the same way as it has done to date ––or whether the increasing revenue volumes will start shifting more and more towards digital sales. Based on the first figures of the current year, it appears that the attraction of town-center shopping continues in the run-up to Christmas. According to Hystreet, there were around 66,000 pedestrians on Bahnhofstrasse during peak days (Saturdays) in November and December 2021. In 2022, on the Saturday after the ‘Lucy’ Christmas lights were switched on (Black Friday weekend), pedestrian football even reached 78,000 in one day. In order to compare these figures against numbers from 2019, surveys carried out by the city of Zurich over many years provide more insights: On Limmatquai, foot traffic was only 4 percent lower in November 2022 than in 2019.
Rising retail space rents in prime pedestrian locations in major cities
The development of pedestrian footfall is a reliable indicator of the retail sales generated and therefore also the cost of retail space rental. Since 2020, top rents for newly concluded retail space contracts have been rising again in all major Swiss cities. However, only the truly prime locations are reporting higher rents –– locations deemed ‘very good’ and ‘average’ have suffered somewhat.
A new empirical study (based on a regression analysis of 14,000 leases) demonstrates how strong the influence of pedestrian traffic is on retail rents. The study controlled other factors related to property and location in order to only consider the impact of pedestrian frequency. The results show that the impact is significant throughout Switzerland, both within and outside the major cities.
The analysis of Zurich in particular shows empirically how rents develop as a result of footfall on Bahnhofstrasse. The rent is around twice as high at locations with twice the number of average daily pedestrians, which currently stands at 15,000 people. In Bahnhofstrasse’s very best locations, according to the extrapolated function, the rent is even almost 5 times higher than for an average pedestrian location. Plus, if only the very latest leases are taken into account, the effect is even greater. This shows that pedestrian location has become increasingly important in terms of both sales generated and the cost of retail property rental.
Pedestrian frequency as the most important location characteristic for retail properties
As shown above, pedestrian frequency still remains the most important indicator of a retail location’s appeal. There are various measurements of pedestrian frequency; this article also draws on various data sources. For meaningful analyses, different influencing variables must be taken into account or controlled (e.g. day of the week, time of day, season, weather, and other events). Wüest Partner uses Senozon’s footfall data for nationwide empirical analyses and the well-known micro-location rating for commercial spaces. Simulated pedestrian frequency data, for every single street, is also available for the entire Swiss road network in the licensed Wüest Dimensions web application.
Additional assessment of the retail space market can be found in Immo-Monitoring 2023
For more information on Wüest Dimensions, click here.