Mitigated economic outlook in 2023 but a more robust 2024 awaited
After difficult conditions throughout the year 2022, economic recovery will be only limited in 2023 with a GDP growth expected around 0 6% for the whole year The Belgian economic outlook is thus mitigated while a more important GDP growth is expected as from 2024 and especially 2025. GDP growth is indeed forecasted around 2.6% in 2025 and 2026. However, Belgian public deficit will remain important in 2023 while public debt could continue to deepen due to recent successive interest rates hikes.
The Belgian political scene is becoming increasingly tense as everyone has already the different 2024 elections in mind. In this context, the Federal Government has many difficulties to finalise some important reforms which could negatively impact the entire economy and/or the attractivity of the country
The unemployment rate should rise to 6.17% this year. According to the latest forecasts, it will increase further to reach 7.3% in 2026. Important disparities are still observed between regions, Flanders performing the best and Brussels the worse.
After having reached historically high level last year, inflation continues to decrease slowly in Europe and in Belgium. It currently stands at 5.2% in Belgium (level observed in May) compared to 6.1% in Eurozone. Despite the decrease of energy prices, the inflation is still far above 2% objective of the European Central Bank, mainly due to high inflation of food prices. To fight inflation, the ECB adopted a tightening of its European monetary policy with successive interest rates hikes. The 400 bps increase over the last 11 months is historic in this context. As a direct result, economic growth is decelerating. However, the ECB should raise its interest rates by 25bps in July to reach its objective in 2024.
As a consequence of these economic evolutions, consumers’ confidence remains stable these last months, though just below the long-term average level. Conversely to last quarter, consumers are now optimistic in the Belgian economic outlook for the next 12 months while their fear regarding their own financial situation increased In this context, the rise of interest rates could indeed push consumers to spare rather than to spend and, as a consequence, lead to a slight decrease in retail sales.
100,000 sq m of take-up in Q2, 15% below same period previous years
With 100,000 sq m of take-up recorded in Q2, activity is perfectly in line with previous Q2. However, as a consequence of a low Q1, year-to-date letting activity is 15% below the same period in 2022 and 2021.
Nevertheless, when looking at the number of deals, we stand above 400 letting transactions since the start of the year thanks to a very robust Q2. This is 10% more than the last years average.
Out-of-Town Retail suffers the most since the start of the year
When comparing the take-up and number of deals with previous years, we immediately see that the deceleration in take-up is mainly attributable to a downward movement of the activity in the Out-of-Town Retail segment. Indeed, after successive rises and historically high levels of take-up, activity is on the downside for the first time since many years as a temporary effect on the home and furniture sector. Year-to-date, activity is lower in this segment.
Conversely, activity in the High Streets is steady, with a similar take-up level (around 50,000 sq m) and more than 210 deals observed (+ 35 compared to H1 2022). As a result, transactions in this segment represent 53% of the total. Food & Beverage operators such as Hawaiian Poké Bowl are still on the expansion while fashion brands continue their portfolio optimisation in Belgium.
After a strong 2022, with 21,000 sq m of take-up in H1 2023, activity in the Shopping Centres is 24% lower than in H1 2022. However, in number of deals, the opposite is observed as more than 60 deals have been recorded so far this year (compared to 54 last year). Activity is relatively important in the Health & Beauty segment as well as in the Food & Beverage.
Retail sales volumes below 2022 levels
As Belgian economy is relatively cloudy and consumers are facing difficult times with high inflation namely, a persistent softness in retail sales is observed since the start of the year 2023. The Belgian retail sector tracked indeed important variations since the start of the year with levels globally 10% below last year. Food, beverages or tobacco record the most important decreases, followed by household equipment
Take-up by quarter (000s sq m)
Gross turnover index in retail sales (Base = 100 in 2015)
Food & Beverage continues to dominate the letting market
Since the beginning of the year, Food & Beverage operators and Clothing retailers are the most active, representing more than 35% of the total number of deals together.
F&B operators continue to be the most active retailers’ typology with openings of new concepts every quarter. Hawaiian Poké Bowl for example is the most active retailer in Q2 23. This trend confirms the shift in customers’ behaviour to spend on doing things and share moments.
Health & Beauty retailers are the third most active this quarter, following strong presence in 2022 as well. Pharmacies dominate this category.
Food retailers remain also active, namely with the recorded lettings of Intermarché, Jumbo or Albert Heijn.
Stabilisation of the footfall in the different market segments
According to the latest figures released by MyTraffic (which undergone a profound revision of their algorithms recently), footfall seems to stabilise in the different market segments, despite monthly variations. After revision, Shopping Centres frequentation is 25 to 30% below preCOVID, though on a slight increase since the beginning of the year 2023.
In the High Streets segment, situation is more correlated to the weather. Following the rainy months observed between January and May, footfall was on the downward, around 40% lower than pre-COVID levels. However, with summer months and summer sales beginning in July, frequentation should start to rise in the coming months and is expected to reach a level 25 to 30% lower than pre-COVID levels
Prime rental values on the rise in every market segment
Prime rental levels recorded positive movements in Q2 in every market segments as a reaction to high inflation. Prime rents for the High Streets segment stand now at 1,650 EUR/sq m/year in the Meir (Antwerp) and at 1,6000 EUR/sq m/year in Brussels. According to our forecasts prime rental levels should rise rise gradually to reach 1,725 EUR/sq m/year in 2026.
In the Shopping Centre segment, prime rents are at 1,400 EUR/sq m/year, after an in-depth revision of our different figures. They should rise again as from 2025.
Prime rents in Out-of-Town Retail increased to 180 EUR and are expected to reach 185 EUR/sq m/year in 2025.
Most active retailers’ typology in
