MARKETBEAT
Q3 2023
MARKETBEAT BELGIUM / Retail Q3 2023
An atone 2023 is confirmed, while the economic recovery will be limited in 2024 YoY Chg
12-Mo. Forecast
281,100 sq m Take-up (2023 YTD)
YoY Chg
12-Mo. Forecast
1,650 €/sq m/y.
Prime rent High Street (Q3 2023)
After difficult conditions in 2022, the recovery is confirmed to be very limited in 2023 with a GDP growth around 0.9% for the whole year. The Belgian economy will only increase gradually as the GDP growth is expected to be around 1.7% in 2024 and above 2.5% in 2025. However, Belgian public deficit is higher than previously forecasted with a complementary EUR 1.2bn to be found in 2024. With the recent interest rates upticks and the 2024 elections, this deficit could weigh on the Belgian recovery. Meanwhile, the unemployment rate is still below 6% in 2023 but is set to reach 7% at the end of 2024 and 7.2% in 2025. Since the beginning of 2023, the business courts pronounced 7,163 bankruptcies. This is 9.5% higher than the same period last year, though 5.3% lower than in 2019. Job losses amount to 20,090 in 2023, an increase of 30.4% compared to 2022. The retail, construction and HoReCa sectors suffer the most form these bankruptcies. Inflation in Europe and in Belgium continues its downward movement though the deceleration is still slow. This negatively impacts the household consumption which is insufficient to boost interior demand. Furthermore, according to the European Commission, energy prices could grow slightly in 2024 and weigh on the economy. Inflation is currently set to reach 4.4% in 2023 and to decrease again in 2024, though remaining above 4%.
12-Mo. Forecast
369 MEUR
Invested volumes (2023 YTD)
Despite this mitigated economic context, consumers’ confidence increased during the summer to reach its highest level since the beginning of 2022. Consumers are more confident on the economic growth though more pessimistic regarding their own financial situation. In the meantime, if the business confidence index is also on the rise in September, the upturn masks contrasting sector-specific developments, namely a decline in retail trade and an even more pronounced dip in the construction industry.
Please note the economic data can vary significantly from one source to the other. Therefore, the figures provided should merely be used as an indication or trend.
2%
-10
0%
-15
-2%
-20
-4%
-25
-6%
-30
GDP Gro wth
Inflatio n
01 04 18 07 18 10 18 01 18 04 19 07 19 10 19 01 19 04 20 07 20 10 20 01 20 04 21 07 21 10 21 01 21 04 22 07 22 10 22 01 22 04 23 07 23 -2 3
Sources: Moody’s Analytics, BNB, Eurostat, Federal Planning Bureau, September 2023
-5
20 26
2023 Consumer Price Index
0
4%
20 25
4.40%
5
6%
20 24
2023 Unemployment rate
10
8%
20 23
5.90%
Consumers confidence index
10 %
20 22
2023 GDP Growth
GDP Growth and Inflation
20 21
0.91%
20 20
12-Mo. Forecast
20 19
Economic Indicators Q3 2023 YoY Chg
To fight inflation, the European Central Bank continues to tighten its monetary policy. Early September, the interest rate was set to 4%, an historically high. The ECB estimates that this increase should be the last one, though this high interest rates should last long to fight the inflation and boost the economic recovery.
20 18
YoY Chg
MARKETBEAT BELGIUM / Retail Q3 2023
2018
2019
2020 Q1
Q2
2021 Q3
2022
2023
Q4
Distribution of the deals by segment 100 % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2018
2019
2020
Out-of -Town
2021
High St reet
2022
23 YTD
Shopping Centre
Prime rent by sector (EUR/sq m/year) 22 50 20 00 17 50 15 00 12 50 10 00 75 0 50 0 25 0 0
25 0 23 0 21 0 19 0 17 0 15 0
Hi gh Street
Sho ppi ng Ce ntre
Note: OOTR Prime rents are to read on the right-hand axis
20 26
20 25
13 0 20 24
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 are expeced to remain stable up to 2025. Prime rents in Out-of-Town Retail increased to 180 EUR last quarter and further uptick are awaited in 2025. They should reach 185 EUR/sq m/year before 2026.
0
23
Following increases observed last quarter, prime rental levels remained perfectly stable this quarter and no more changes are expected before 2024. In the High Streets segment, prime rents stand at 1,650 EUR/sq m/year in the Meir and 1,600 EUR in the Rue Neuve in Brussels. Gradual increases are awaited as from 2024 to reach 1,725 EUR by the end of 2026.
100
3
Stability of the prime rents in every market segments in Q3
200
Q
Finally, in the Out-of-Town segment, around 180 transactions are recorded year-to-date. In this specific segment, the take-up is currently around 150,000 sq m, far below the impressive levels seen in 2021 and 2022. This is namely due to the low number of new projects on the market after many years of strong deliveries. Next to this, if food retailers and home furniture (& DIY) retailers remain the most active, their fast expansions just following the COVID seem to be over.
300
20 22
Activity in the Shopping Centre is also on the rise compared to 2022 as more than 120 transactions are already observed in Belgium. This represents a total take-up of 47,000 sq m (higher than the level observed for the whole 2021 for example). Fashion brands are the most active in the market segment. Some newcomers are also entering the Belgian market, Douglas in Wijnegem, Chaussures Besson in City 2 or Naumy in Galeries Saint-Lambert in Liège.
400
20 21
Indeed, since the start of the year, around 300 transactions (81,000 sq m) were recorded in the different High Streets of the country. This quarter, transactions such as the arrival of clothing brand Naumy in Namur and Brussels are to mention. Naumy will also open in the Shopping Centre segment in Liège by the end of the year. The arrival of Levi’s and important investments done by Cartier to refurbish its store confirm also the attractivity of the Toison d’Or and Boulevard de Waterloo respectively as strong location for high-end or luxury brands. Next to fashion, F&B remains very active in the different city centres, both in the biggest as well as “secondary” cities.
500
20 20
Year-to-date, 600 retail transactions have been observed on the Belgian retail market, a level similar to previous years. As such, this highlights a higher level of activity in the High Streets and Shopping Centres segment than in the Out-of-Town retail.
600
20 19
In Q3 2023, letting activity reached 102,000 sq m, the highest quarterly level since the start of the year. However, activity is still subdued in terms of surfaces and compared to the same period last year, retail take-up is 20% lower.
Take-up by quarter (000s sq m)
20 18
Year-to-date, letting activity is recorded 20% below 2022
Out-of-To wn Re ta il
MARKETBEAT BELGIUM / Retail Q3 2023
Investment activity negatively impacted by interest rates hikes
Invested volumes by market segment (MEUR)
After a strong Q1 where 240 MEUR were invested on the retail investment market, activity is gradually decreasing as this quarter only 50 MEUR were invested in Belgium. Q2 recorded a 75 MEUR share. Year-to-date, invested volumes are 16% below the levels observed in 2022.
2 500
The economic uncertainty and the continuous rise of the interest rates since mid-2022 strongly impacted the investment market both in Europe and in Belgium. The global investment volumes across Europe are 56% down compared to previous year. As such, the Belgian investment market shows greater resilience despite tightening financing conditions and a wait-and-see approach from investors.
1 500
Around 50 transactions were recorded so far this year, compared to 84 last year. This slowdown confirming the cautious approach of investors on the retail investment market, complementary to a growing inequation between sellers and buyers’ expectations. In the High Streets segment, the most significant transaction of the quarter is the sale of 4 retail units in the Kouter project in the city centre of Ghent for a total of 10 MEUR. The 4 retail units are let to key tenants and confirms that strong project in core locations can find positive outcome on the retail market. In the Out-of-Town segment, a sale & lease back of 2 Oh’Green shops constitute the biggest transaction in Q3. The 35,000 sq m retail surfaces were sold for an estimate 40 MEUR and a yield around 6.50%.
2 000
1 000 50 0 0 20 18
20 19 Out-of-To wn
20 20 20 21 20 22 23 YTD Hi gh Street Sho ppi ng Ce ntre
Prime yields by market segment 7% 6% 5% 4% 3% 2% 1% 0%
After previous increases, prime yields have been kept stable in Q3. They now stand at 4.85% in the High Streets segment (compared to 4.35% one year ago and 3.15% at the peak of the market). A theoretical prime yield for the Shopping Centre segment can be established somewhere between 5% and 5.25% (+ 30bps compared to Q3 22) while prime yields stand at 6% in the Out-of-Town retail segment (+40bps compared to Q3 22). Recent interest rates increases should lead to slight uptick before year-end though stability at these new levels is awaited for the coming months, in line with recent announcements of the European Central Bank. However, in the longer term, as the forecasted 10-years bond yield shows a relative stability around 2.7% up to the end of 2026, the market will adapt to these new conditions and as a result, we could observe a slight compression of the prime yields in all market segments as from 2025.
20 26
20 25
20 24
23
23 En d-
3 Q
20 22
20 21
20 20
20 19
Prime yield stable in Q3 but expected to rise again before year-end
20 18
-1%
Out-of-Town
High Street
Shoppi ng Centre
10y. Bond Yields
MARKETBEAT BELGIUM / Retail Q3 2023
Sup ermarke t He alth & Beau ty Oth ers 0%
10 %
20 %
30 %
40 %
50 %
60 %
70 %
Expected impact of the interest rates hikes on the retail yield by market segment 10 0% 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % en ts
te r
n
lop m
lu s
de ve
or c M
ixe
d
s
ou t-o alo ne
St an d-
Re ta il P ar k
st igh yh
f-t ow
re et s
Si x’
s
0% ai n
As a conclusion of our third retail investors survey, 2024 should remain a challenging year for retail, though investors, while remaining cautious, are confident for a gradual recovery of the investment market as from September 2024.
Perso nal g ood s
M
On the investment volumes, 64% of the respondents think the future retail invested volumes will be lower in 2023 and 2024 than in 2022 as a direct result of less favourable economic conditions, a lower level of interesting opportunities and tighter financing. The vast majority of the respondents also believe that yields can still increase by a minimum of 25bps as a consequence of the interest rates hikes decided by the European Central Bank these last months. 40% of them even think the yield increase will be of 50bps minimum, though depending on the market segment. For the AAA High Streets or the Main Six for example, close to 30% of the respondents forecast a stabilisation while 28% of them assume a very limited yield increase. The most impacted segment could potentially be the Stand-alone Out-of-Town retail units where more than 50% of the respondents think the rise will be of minimum 50bps.
Ho useh old g ood s
Se co nd ar
Despite a difficult market context mostly due to less favourable financing conditions (80% of the respondents find indeed that financing conditions are more difficult than previous year), retail investors remain both on the acquisition and the purchase, though in a more opportunistic approach for 56% of the respondents, while only 16% are actively seeking for new opportunities. Regarding the potential future investments, while investors still consider the location as the most important factor (55% of the respondents), the activity of the retailer is ranked second. Looking further to this specific criteria, F&B remains the most sought-after activity sector (60% of the respondents) as already observed previous years. Household goods, personal goods (clothing, shoes…) and supermarket record the same interest, 55% of the respondents considered these sectors as favoured when investing. This is a rebalancing compared to previous years where clothing was ranked below. Finally, other sectors such as luxury retailers (jewelry, watches…) are key for 10% of the respondents.
Food & Beve rage
or ‘
During September, we conducted our third retail investment survey to benefit from retail owners and retail investors’ insights on the financing conditions, market feeling and yields’ expectations amongst others.
Favoured activity sector while investing
AA A
What to expect on the investment market in 2024?
Increa se abo ve 50b ps
Increa se fro m 2 5 to 5 0bp s
Increa se fro m 5 to 25 bps
Stabi lisa ti on
Co mpressi on be tw een 5 a nd 15 bps
Cédric VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 cedric.vanmeerbeeck@cushwake.com Jean BAHEUX International Partner | Head of Retail Agency +32 478 96 08 61 jean.baheux@cushwake.com Victoria TANRET Partner | Head of Capital Markets Retail +32 491 34 77 33 victoria.tanret@cushwake.com
A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION ©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.
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