M A R K E T B E AT
BELGIUM Retail Q2 2022 YoY Chg
12-Mo. Forecast
262,000 sq m 2022 YTD Take-up
1,550 €/sq m/y. High Street Prime Rent
4.35% High Street Prime Yield Source: Cushman & Wakefield
-
BELGIAN ECONOMIC INDICATORS YoY Chg
12-Mo. Forecast
2.15% 2022 GDP Growth
Inflation still on the rise, though decelerating recently. Inflation in Belgium climbed again in April and May 2022. As a result, inflation is currently expected to reach a sky-high 8.3% for the whole year 2022, before decelerating sharply as from 2023 to finally reach the ECB objective of 2% by 2024. Recent political evolutions show no signs of short-term resolution of the Ukrainian crisis. Furthermore, growing tensions between China and Taiwan could potentially have an important impact of the world economy in the medium-term. With rising uncertainties, central banks across the globe take the decision to increase interest rates to fight inflation, with a negative effect on public debt and a potential negative output for the economy. In this challenging times, GDP growth has been revised on the downward and should stand around 2.15% for 2023 and continue to decelerate (though remaining positive) up to 2025. This could potentially weigh on the unemployment rate which is still expected to decrease by the end of 2023 to reach 5% in Belgium before rising again to 5.6% by 2025. High inflation has unfortunately a negative impact on the household disposable income growth which is expected to be close 0% in 2022 before gaining power as from 2023. Consumers’ confidence are still relatively down, though on a slight increase since May 2022. Uncertainties will certainly continue to shape the year 2022. GDP GROWTH AND UNEMPLOYMENT RATE
INFLATION AND HOUSEHOLD DISPOSABLE INCOME GROWTH
10%
9.00%
8%
8.00%
6%
7.00%
8.30%
4%
6.00%
Consumer Price Index
2%
5.00%
0%
4.00%
-2%
3.00%
-4%
2.00%
-6%
1.00%
5.35% Unemployment rate
Source: Moody’s Analytics and Federal Planning Bureau, June 2022
0.00%
-8% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 GDP Growth Sources: Moody’s Analytics, BNB, Eurostat, June2022
Unemployment rate
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Inflation
Household disposable income
M A R K E T B E AT
BELGIUM Retail Q2 2022 Take-up still full steam ahead despite global uncertainties.
TAKE-UP BY QUARTER (000s sq m, LHS) & # DEALS (RHS)
Letting activity is still at high level in Q2 (around 126,000 sq m, just below record Q1 at 136,000 sq m) despite growing uncertainties and rising inflation. As a result, year-to-date, occupational activity stands at around 262,000 sq m, the highest first semester ever observed. 443 deals are recorded in the first half-year 2022, 16% above the 5-year annual average. These exceptional figures confirm the strong recovery observed in 2021 with 481,000 sq m of take-up. Currently, retailers are still implementing their post-COVID strategy, some expanding heavily while others are optimising their previous locations. However, if inflation is to last longer than expected, this could weigh on retailers’ turnovers and, as a consequence, on their willingness or ability to develop new stores.
Out-of-Town Retail activity represents 40% of the deals.
DISTRIBUTION OF THE NUMBER OF DEALS BY SEGMENT
Since 2018, activity in the Out-of-Town Retail segment is on the rise. It reached a new summit in H1 2022 as 40% of the total number of deals were observed in this segment. This represents more than 173,000 sq m of take-up year-to-date. The largest transactions of this quarter in the Out-of-Town Retail segment were made by Jumbo, Aldi and Albert Heijn which continue their respective expansions, mostly in Flanders. The biggest transaction of the quarter has been witnessed in the Shopping Centre segment, with the 4,000 sq m letting by O’Learys (sportsbar & bowling operator) in the TT Center in Hasselt. Activity was also driven by clothing retailers this quarter as Zara and H&M announced extensions in the Westland Shopping Centre while Sissy Boy made its entry on the Belgian market in Wijnegem Shopping Centre. Other clothing and sportswear brands were also active in the Shopping centre segment since the start of the year. As a result, activity stands year-to-date at 30,000 sq m (and roughly 60 transactions). In the High Street segment, activity is in line with previous years. Year-to-date, take-up is around 55,000 sq m (200 transactions). Following a first and more dynamic quarter in Flanders, Brussels recorded robust activity thanks to the 2,300 sq m letting of New Yorker on the Rue Neuve, the 2,000 sq m of the Museum of Illusions (Rue Fossé-aux-loups) and the lettings of Balenciaga and Mayfair on the Boulevard de Waterloo amongst others.
Retail trade activity globally stable despite growing uncertainties. According to latest figures released by Eurostat, retail trade activity in Belgium is not impacted by recent turmoil. Indeed, since the end of containment measures, activity is very stable for the different goods and services highlighted on the chart. Activity was more impacted by the COVID-19 crisis where online sales reached a summit while clothing was the most impacted.
RETAIL TRADE INDEX IN BELGIUM (Base = 100 in 2015)
M A R K E T B E AT
BELGIUM Retail Q2 2022 Footfall attests to different trends between Shopping Centres and High Streets.
FOOTFALL INDEX (Base = 100 in January 2020)
According to information collected by our partner MyTraffic, footfall across High Streets and Shopping Centres observe slightly different paths since February 2022. Globally, there is little doubt that pressure on the household disposable income has an impact on the customers’ willingness to buy. Globally, Shopping Centres experienced a better recovery and are almost back to their pre-COVID levels in May 2022. Furthermore, they observe a positive trend since February. Conversely, footfall evolution is more mitigated in the High Streets since February. Activity is currently 50% below pre-COVID levels and seems to have come to a halt after the positive evolution observed between April and the end of the year 2021.
No impact of growing uncertainties on prime rental levels yet. Despite growing uncertainties, prime rental levels seem to have stabilised since the second part of the year 2021.
Source: MyTraffic Note: High Streets index based on 15 High Streets across Belgium; Shopping Centres Index based on 12 Shopping Centres across Belgium
PRIME RENT BY SECTOR (EUR/SQ M/YEAR)
Prime rents for the High Street segment remain at 1,550 EUR/sq m/year in the Meir (Antwerp) and the Rue Neuve (Brussels). The other High Streets of the country are lower, though stable since the second part of 2021 as well. According to our forecasts and despite current turmoil, stability is expected throughout 2022 and prime rental levels are still forecasted to rise gradually to reach 1,575 EUR/sq m/year in 2023 and 1,650 EUR/sq m/year by 2025. In the Shopping Centre segment, prime rents stand at 1,150 EUR/sq m/year since the beginning of 2021. Stability is expected throughout 2022 and a slight though continuous increase is also awaited as from 2023. They should stand around 1,250 EUR/sq m/year by 2025. It is worth mentioning that the rental evolution will probably be different between the prime shopping centres of the country and the “secondary” ones. As observed these last months, bigger and better located shopping centres, offering a better commercial mix (including F&B and leisure) will probably witness a positive evolution while the rest of the stock should face growing issues regarding their attractivity and, as a consequence, their rental levels. Benefitting from robust performances on the occupational market, prime rents are more stable in the Out-ofTown segment. They currently stand at 160 EUR/sq m/year and should rise as from 2023 to to reach 170 EUR/sq m/year by 2024.
Note: High Street and Shopping Centre are to be read on the left axis, Outof-Town on the right-hand axis
M A R K E T B E AT
BELGIUM Retail Q2 2022 Retail park transactions give a small boost to the investment market.
INVESTMENT VOLUME BY SEGMENT (in MEUR)
Conversely to the occupational market, activity on the investment market is still subdued with roughly 300 MEUR invested since the beginning of 2022. Despite this low invested volume, more than 50 deals have been recorded so far, confirming the interest for smaller tickets. Furthermore, activity in the Out-of-Town Retail is intense with 235 MEUR invested since the start of the year. Following the sale of the Fleron retail park in Q1, the brand-new retail park Parenthèse has been sold by Equilis this quarter for a total of 23 MEUR. Other transactions such as the disposal of the Court Village in Court-SaintEtienne and the Papeteries de Genval confirm the good shape of this market segment. Despite uncertainties and growing interest rates, investors are indeed still seeking to invest in this specific market segment as performances on the occupational market are strong and should remain at high level in the coming years. In the High Streets segment, activity is relatively low at the time being with only 60 MEUR invested so far in 2022. However, transactions such as the purchases of the Veldstraat 98 (Women’s Secret) in Ghent or the Boulevard de Waterloo 33 in Brussels show that opportunities and interest still exist for very specific locations.
Prime yields stable in Q2. Potential changes awaited, depending on evolution of interest rates. Despite uncertainties, no changes on the prime yields are to mention since the start of the year. In Q2 2022, prime yields for the High Streets stand at 4.35%, 4.65% for the Shopping Centres and 5.60% for the Out-of-Town retail. Although our forecasts still announce stability for 2022 before a slight compression as from 2023 in every market segments, recent decisions of the FED and ECB to increase interest rates to fight inflation could change the outlook for the second half of the year. Indeed, according to latest forecasts from Moody’s Analytics, the 10 years OLO should stand above 2% before year-end and around 3% by 2025. In this context, we will probably witness (slight) prime yield increases in the coming months. In the meantime, the lending landscape will become tighter as investors will adopt a wait-and-see attitude in every market sector (including offices and industrial), though some opportunistic transactions will occur.
PRIME YIELD BY SEGMENT
M A R K E T B E AT
BELGIUM Retail Q2 2022 What to expect on the retail market in the coming years? As the COVID-19 pandemic surged, many speculated that the increase of online retail activity would forever change the retail landscape, eliminating the need for the physical store. However today, online retail sales are levelling off at around 15% of total retail sales, down from nearly 20% in 2020 at the height of the pandemic. In the first months of 2022, we still see retailers opening new stores. This is all an indication that retail stores are here to stay, because they do much more than just serve as a place to shop: •
Stores drive growth for emerging brands: although we have seen great success with digital-only brands, an increasing number of retailers are recognising that a physical store helps to drive growth and create brand awareness. Physical stores ensure an immersive customer experience, reduce customer acquisition costs and help build a longer lasting relationship.
•
Stores complete the brand experience: A meaningful brand experience helps retailers convert consumers and drive sales. To achieve this, consumers need to engage all their senses in the brand—and a physical store location allows them to do just that. New retailers can introduce customers to their products, promotions and ethos, while existing retailers can evolve their brand by testing new merchandise, in-store consumer journeys and marketing materials. Technology advancements, including buy online, pick up in store; diverse payment types; and inventory transparency are also important to the overall brand experience.
•
Stores are part of the supply chain ecosystem: Retail brands are creating a true ecosystem focused on exposing inventory, improving delivery, reducing carbon footprint and satisfying consumer demands. Stores can create their own hub-and-spoke supply chain to meet community demands.
cushmanwakefield.com
•
Stores provide immediate access to product: While many retailers are offering convenient services such as free or next day shipping, shopping in a store provides instant gratification. Engaging with store staff, learning about new products and trying on items before you buy, are all part of a great brand experience.
•
Stores are important to communities: Retailers significantly contribute to communities by driving engagement. As we move through 2022 and into 2023, retail brands are embracing a localised consumer experience to drive new engagement. F&B operators are for example examining demographics to embrace the nuances of communities.
A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.
As stores are here to stay, in different formats and concepts, they will continue to drive occupational activity. This should help on the gradual recovery of the investment market in the coming months.
CEDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 / cedric.vanmeerbeeck@cushwake.com
©2022 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.