M A R K E T B E AT
LUXEMBOURG Retail Q4 2020 YoY Chg
22,300 sq m 2020 take-up
140 €/sq m/m.
Despite a low Q4 (with only 3,300 sq m of take-up), 2020 performed better than previously expected. Despite a plethora of articles depicted an apocalyptic situation for the retail sector: changes in consumption patterns, an explosion of online shopping, a dramatic drop in footfall in shopping streets and shopping centres, retailers going bankrupt, turnover plummeting, negotiations on rent discounts between tenants and landlords, etc., with around 22,300 sq m of take-up and 56, 2020 is perfectly in line with the previous years (with the exception of the exceptional level observed in 2019).
3.50% High Street Prime Yield Source: Cushman & Wakefield
LUXEMBOURG ECONOMIC INDICATORS Q4 2020 YoY Chg
GDP Growth
6.4% Unemployment rate
0.9% Consumer Price Index (% change) Source: Statec.lu
ECONOMY: Economic rebound expected in 2021 despite further increase in unemployment The GDP growth is projected to fall by 3.5% for 2020 as a result of the COVID-19 outbreak. Domestic demand is expected to decline due to lower private consumption and investment. For 2021, a rebound in GDP growth to 4% is expected, with risks mainly on the downside should the pandemic last longer than expected. Private consumption is forecasted to remain mitigated in 2021 as a result of growing uncertainties and the weakening of the labour market. Unemployment is expected to increase further in 2021 to reach 6.8% compared to 6.4% in 2020. The inflation stands at 0.9% at the end of 2020 and should rise to 1.8% next year.
LETTING MARKET: 2020 performed better than expected
High Street Prime Rent
-3.5%
12-Mo. Forecast
12-Mo. Forecast
Actually, the impact of the health crisis has created a "communicating vessels" effect in household consumption, with less spending in the personal equipment sector and more in household equipment, sports equipment and the food sector. As such, activity was more impacted in the high streets and shopping centres with the successive closures of non-essential shops and footfalls on a huge rollercoaster. Out-ofTown retail is performing better as the presence of essential shops (supermarkets, food stores, but also DIY and garden centres) obviously acted as a catalyst. Recent transactions of Delhaize or Lidl confirmed. But beyond this, it is in reality the format of out-of-town retail which is increasingly appealing to consumers, retailers and developers. Prime rents decreased in the high streets and in the shopping centres this year. They now stand at 140 € (though at 70€ in the avenue de la Gare which suffers from infrastructure works) and 95 €/sq m/month respectively. They remained stable in the out-of-town retail. The trend for the coming months is to a further downside in the high streets to 135€/sq m/month while stability is expected in the shopping centres and out-of-town retail. However, depending on the evolution of the sanitary crisis, the situation could be very different. TAKE-UP (in 000s SQ M, LHS) and # deals (RHS)
INVESTMENTs (MEUR, LHS) AND PRIME YIELDS (%, RHS)
140
160
120
140
7%
300 250
6%
120
100
100
80 60 40
200 5%
80
150
60
100
4%
40
3%
50
20
20 0
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1
Q2
Q3
Q4
# deals
0
2% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Investments (MEUR)
High Streets
Shopping Centres
Out-of-town retail
M A R K E T B E AT
LUXEMBOURG Retail Q4 2020 INVESTMENT MARKET: A greater cautiousness of the investors could lead to yields increases. With the exception of two transactions observed in Q1 (the purchases of the Walfer Shopping Centre and the Retail Park Sandweiler respectively for 27 MEUR and 24 MEUR), no investment activity has been observed in Luxembourg in 2020. Even if investors are more and more cautious for bigger volumes and shopping centres investment files, the retail investment market remains active when convenience stores, mixed-use projects and smaller volumes are concerned as confirmed by the retail parks transactions recorded in 2020. We could observe a further shift towards more investments in files with food retailers as tenants, and thus in out-of-town transactions. As a result of this greater cautiousness, prime yields could increase again in the coming months in the high streets segment and reach 3.75% in 2021 (compared to 3.50%currently) while they would rather remain stable or even compress slightly in out-of-town retail.
OUTLOOK: The retail landscape will continue its reshaping in 2021. The COVID-19 crisis accelerates the reshaping of the retail industry. The growing shift towards online retail, changing consumers’ patterns, demographic shifts… are constraining retailers to better understand their customers, to reinvent themselves and to develop omni-channel strategies. Physical retail is however set to survive though in a different format. Out-of-town may be perfectly suited to the increased use of click & collect and the desire of retailers to get closer to their customers. Out-of-town retail could therefore play a decisive role in the realisation of an omni-channel strategy for retailers, in particular thanks to the increased storage possibilities. Meanwhile, the shopping centre format will continue to evolve towards greater integration with the Food & Beverage and leisure segment. Like shopping centres, the experience (and the pandemic safety aspect) are essential elements for the success of tomorrow's shopping streets. Unlike shopping centres, however, the multitude of owners means that the public authorities need to participate in the design of public spaces (as currently ongoing around the station and Avenue de la Gare). A real partnership between owners, public authorities and retailers must therefore be created to develop a genuine renewal of the country's commercial neighbourhood, which will be beneficial for the revival of urban life.
MARKET STATISTICS SUBMARKET
PRIME RENT (EUR/SQ M/MONTH)
PRIME YIELD (%)
HIGH STREET
140
3.50%
OUT OF TOWN RETAIL
23
6.00%
SHOPPING CENTRE
95
5.50%
CEDRIC VAN MEERBEECK Head of Research & Marketing Belgium & Luxembourg +32 477 98 11 83 / cedric.vanmeerbeeck@cushwake.com
MARINE FETIQUE Retail Agency Luxembourg +352 27 21 33 06 / marine.fetique@cushwake.com
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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 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. ©2020 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.