Microsoft will open its first retail store in Europe on Thursday as the software giant looks to boost its physical presence and compete with other tech companies offering unique in-store experiences for customers. The 21,932 square-foot Microsoft store will be located on Oxford Circus in the center of London's famous shopping district – just down the street from Apple's flagship Regent Street location. London will be Microsoft's third flagship destination, along with Sydney and New York City.

Inside Microsoft's flagship London store CNBC | Benjamin Hall

"This is our very first foray into Europe, and we couldn't be more pleased to be in London," Microsoft CMO Chris Capossela said in an interview Tuesday. Microsoft is among a growing list of tech companies expanding their physical presence to complement online sales. Amazon is reportedly planning to open up to 3,000 cashier-less grocery stores by 2021. Chinese tech giant Xiaomi told CNBC in February it plans to triple its European store count by the end of the year.

Richard Lim, CEO of research firm Retail Economics, said tech companies are looking to generate buzz and loyalty in their brands by offering new in-store experiences. "Primary locations like Oxford Street, where there's sustainable levels of footfall, where the experience is much more than retail, is one of the crucial ingredients for success," Lim said.

A McLaren inside Microsoft's London store CNBC | Benjamin Hall

Microsoft's 3-floor store includes an Xbox gaming room, a customized McLaren, meeting rooms for enterprise clients and a digital classroom where students can learn how to code. Cindy Rose, CEO of Microsoft U.K., said the store appeals to general consumers, as well as the company's more targeted customers like businesses and gamers. The store also highlights Microsoft's Surface computers and tablets, which have helped the software titan grow its hardware business. Sales of Surface devices increased 21 percent year-on-year last quarter. "The Surface hardware that you see all throughout the store, that's going to be a big big seller," Capossela said. "There's no doubt that a physical store is actually very good for choosing physical products and that's part of why we're here."

Microsoft Surface Book on display in London flagship store CNBC | Benjamin Hall