In 2010, a piece of real-estate research took an unusual step: it tried to forecast prime retail rents in eight European cities not by gut feeling but with an econometric model – five years ahead, to 2015. The basis was macroeconomic fundamentals alone. Sixteen years on, it is possible to check soberly how well that approach did. This is more than an academic exercise: anyone deciding on acquisitions, rent assumptions or exit scenarios on the high street works with the same questions.
Key takeaways
- In 2010, an econometric study forecast prime retail rents in eight European cities to 2015 using only macro fundamentals – retail-sector value-added and employment.
- Within its forecast window the model was largely right; the crisis-resistance of prime (“1A”) locations has held for more than a decade.
- A pure macro model could not foresee the structural break from e-commerce (from around 2018) or the pandemic – German prime rents fell afterwards.
- London and Paris confirmed the thesis most clearly: London’s New Bond Street became the world’s most expensive retail street in 2025.
Two macroeconomic metrics were meant to explain prime rents
The model (Konstantin Hähndel, “Retail rents in the prime locations of European metropolises”, VDG Weimar 2010, written in cooperation with Deka Immobilien) relied on two statistically significant variables: the value-added of the retail and distribution sector and employment in that sector. Using a regression of historical time series combined with a macroeconomic forecast, the author derived prime rents to 2015 – for Berlin, Munich, Hamburg, London, Paris, Lyon, Madrid and Barcelona.
The starting values back then were deliberately set as a basket average of several top locations, not a single-street record. Berlin stood at just under €2,580/sqm/year, London at around €4,100/sqm/year (the average of the “ORB” streets Oxford, Regent and Bond Street). Hamburg was projected to rise to up to €2,850/sqm/year by 2015, Paris to an average of up to €8,000/sqm/year. One caveat for the comparison: modern benchmarks quote individual top streets, whereas the model worked with a basket. What matters, therefore, is the direction of travel, not the absolute figure.
Germany: the direction was right – until e-commerce bent the curve
For the German locations, the model projected a slight decline followed by renewed growth to 2015. Within its actual forecast window it was largely right: prime rents in Germany’s top locations climbed into the mid-2010s.
After that, the curve turned – for a reason that no 2010 time series contained. From around 2018, growing online retail weighed on demand for space, and the pandemic accelerated the decline. By 2024, prime rents were below their earlier peaks in many places: around 22% below peak in Stuttgart, while Munich held at the top with just under €300/sqm/month (source: REFIRE / DZ HYP, Real Estate Market Germany 2025). Cushman & Wakefield put Munich’s Kaufinger/Neuhauser Strasse at €3,840/sqm/year for 2024 (source: C&W, Main Streets Across the World 2024). The model described the business cycle cleanly – the structural break from e-commerce it could not see.
London and Paris: the “prime stays prime” thesis delivered
The study’s central assumption was confirmed most clearly: the prime segment is remarkably crisis-resistant. For London, the model expected a short correction followed by renewed, stronger growth than in the German markets. The correction turned out milder than assumed – but the growth thesis hit the mark: New Bond Street became the world’s most expensive retail destination for the first time in 2025, at US$2,231 per sq ft per year and up 22% in a single year (source: C&W, Main Streets Across the World 2025).
Paris confirmed the direction too. The Avenue des Champs-Élysées remains among Europe’s most expensive locations; in 2024, depending on the section, rents range between roughly €10,000 and €25,000/sqm/year (source: market data 2024/25). The decisive point is the relative pattern: that London and Paris would outprice the German locations was something the model had mapped out correctly.
Spain: the caution was justified – but the recovery still came
The study treated Madrid and Barcelona explicitly as the exception: the regression fit less well here, and the author warned of structural risks in the Spanish economy. In the short term he was right. Spain slid deeper into crisis – GDP fell 3.7% in 2009, and unemployment was above 27% in 2012 (source: PMC, “From Boom to Bust 2008–2013”).
Yet the recovery proved stronger than the gloomy scenario suggested. In 2024/25, Portal de l’Àngel in Barcelona at around €265/sqm/month and Preciados in Madrid at around €263/sqm/month lead the Spanish high streets – with near-full occupancy and rents above pre-crisis levels (source: idealista 2025). Here too, the prime segment showed more substance than fundamentals alone would suggest.
What does this mean for investors in 2026?
The review offers three solid lessons. First: macroeconomic fundamentals explain the floor and the relative ranking of locations well – the crisis-resistance of true prime is not a marketing promise but documented over more than a decade. Second: macro time series do not see structural breaks. E-commerce and the pandemic shaped the second half of the 2010s – neither was in any 2010 model. Third: the flight to the best locations has intensified.
From an investor’s and owner’s perspective: fundamentals belong in the underwriting, but they are not enough. Anyone modelling rent assumptions and exit scenarios has to lay structural change alongside them – and cleanly separate genuine prime from the “good” location that only holds until demand turns.
Frequently asked questions
What drives prime retail rents in top (“1A”) locations?
Beyond supply and demand, above all the economic base of the location. The 2010 econometric study identified two statistically significant drivers: value-added and employment in the retail and distribution sector. Structural forces such as online retail act as a separate factor on top.
Are high-street rents recession-proof?
Largely yes for true prime. The prime rents of genuine “1A” locations ran through the 2008/09 financial crisis largely unaffected; in 2025 London’s New Bond Street hit an all-time high of US$2,231 per sq ft per year (+22% year on year, source: C&W). Secondary locations, by contrast, are far more exposed.
Why did German prime rents fall after 2015?
From around 2018, growing online retail weighed on demand for space, and the pandemic accelerated the decline. By 2024, rents were below peak in many cities (e.g. Stuttgart −22%), while Munich held near €300/sqm/month (source: REFIRE / DZ HYP).
Which is Europe’s most expensive shopping street in 2025?
London’s New Bond Street – the world’s most expensive retail street in 2025 at US$2,231 per sq ft per year (source: C&W, Main Streets Across the World 2025).
