M A R K E T B E AT
Luxembourg Retail Market Retail Q1 2022
YoY Chg
12-Mo. Forecast
6,031
The consumer price index in Luxembourg is forecasted to climb to 6.0% in 2022, a record peak. In February 2022, the Russian invasion of Ukraine pushed global energy prices sky-high. With the conflict showing no signs of ending, and EU restrictive measures against Russia, energy prices will continue to drive inflation in Luxembourg. Combined with the fact that consumer spending is set to increase after a record year of saving, inflation is set to rise. In the longer term however, inflation is expected to be around 2% on a yearly basis up to 2025.
Take-up 2021 YTD (sq m)
17
# Deals 2021 YTD
140 EUR/sq m/m.
-
Prime rent High Street
3.75%
Prime Yield (3/6/9 Lease)
ECONOMIC INDICATORS Q1 2022
4.7%
Luxembourg inflation hits all-time high.
YoY Chg
12-Mo. Forecast
Unemployment Rate
2.7%
GDP Growth
6.0%
Consumer Price Index
Source: Moody’s Analytics, Statec.lu, Eurostat 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.
A period of uncertainty is taking place with the crisis in Ukraine and if it continues, Luxembourg’s economic growth could be affected.
Rising growth and falling unemployment rate. Luxembourg’s economy is forecasted to grow by 2.7% in 2022. This is expected to slow down slightly and stabilise at 2.5% for the next year and slow down further to 1.8% in 2024. This growth is associated with a decrease of the unemployment rate to a level of 4.7% in the first quarter of 2022. This is due to the fact that an important quantity of previously temporarily unemployed individuals have returned to the workforce in early 2022. In the medium-term, unemployment is expected to slightly increase to stabilise around 4.9% by the end 2022 and 5.0% in 2023. GDP Growth (LHS) and Unemployment rate (RHS)
Consumer Price Index
8%
7%
6%
6%
4%
5%
2%
4%
0%
3%
-2%
2%
-4%
1% 0%
-6% 20 16
20 17
20 18
20 19
GDP Gro wth
20 20
20 21
20 22
20 23
20 24
Un empl oymen t Ra te
20 25
2016
2017
2018
2019
2020
2021 in fl ation
2022
2023
2024
2025
M A R K E T B E AT
Luxembourg Retail Market Retail Q1 2022 A decent start to the year on the Luxembourg retail occupational market. A decent 6,000 sq m of take-up has been recorded in Q1 2022, despite unprecedented circumstances. Following the robust year 2021, the Luxembourg retail landscape shows a strong resilience to shocks. The impact of the COVID-19 was only limited and according to recent economic forecasts, the impact of high inflation and the Russian invasion of Ukraine should be limlted as well should the conflict comes to an end rapidly. 17 deals have been observed in Q1 2022, a start to the year perfectly in line with the previous average.
Take-up by quarter (000s sq m, LHS) & # deals (RHS) 14 0
16 0
12 0
14 0 12 0
10 0
10 0
80
80
60
60
40
Out-of-Town retail continues to drive the activity, as observed since 2020. Overall, the High Street sector recorded a take-up of around 2,270 sq m (37% of the total take-up) in Q1 22 thanks to 9 transactions. The biggest one is the 760 sq m letting of Foot Locker in the 44 Avenue de la Gare. The Royal Hamilius also witnessed strong activity with 3 different transactions, namely the future opening of the Prêt-à-Manger. Food & Beverage operators although continue to be the most active with transactions signed by Pitaya, Pokawa or Casa del Cafe amongst others. The High Street landscape is currently in a profound mutation in the city centre, as the vicinity of the station is currently under a strong refurbishment with the arrival and the extension of the tram. If the surroundings of the station are currently impacted by these infrastructure works, the future looks bright for this area and its surroundings such as the redevelopment of the Bonnevoie area scheduled for 2024 (a project developed by Eaglestone). Activity in the Shopping Centre segment remains relatively low, with 5 transactions recorded during this first quarter for a total take-up of 606 sq m. This represents 10% of the total take-up observed in Q1. With the 260,000 sq m new shopping centres which entered the market between 2018 and 2020, an exceptional activity was logically observed. Since then, activity is back to more normal levels. We could however assist to an upsurge of activity in the coming months or years as some ageing shopping centres will need important refurbishment to adapt to new standards and to (re-)position themselves as a retail destination to attract clients. Conversely, Out-of-Town retail continues to record intense activity and 3,150 sq m of take-up in Q1, within the 2,600 sq m letting of the supermarket Match in the Perspectiv’ project developed by Atenor in Esch-sur-Alzette. As this retail format is increasingly appealing for retailers, clients and developers (the development of mixed-use project, including retail and residential limits risks), activity should remain intense in the coming months.
40
20
20
0
0 20 16
20 17
Q1
20 18
20 19
Q2
20 20
Q3
20 21
20 22
Q4
# de als
Distribution of the take-up by market segment 10 0% 80 % 60 % 40 % 20 % 0% 20 16
20 17
20 18
Sho ppi ng Ce ntre
20 19 Mai n Stre et
20 20
20 21
Q1 22
Out-of-To wn
Consumers’ confidence Index 5 0
Is the strong decline in consumers’ confidence set to limit activity on the retail occupational market?
-5 -10 -15 -20 -25 -30 ja nv M -16 ay se -1 6 p ja t-1 6 nv M -17 ay se -1 7 p ja t-1 7 nv M -18 ay se -1 8 p ja t-1 8 nv M -19 ay se -1 9 p ja t-1 9 nv M -20 ay se -2 0 p ja t-2 0 nv M -21 ay se -2 1 p ja t-2 1 nv -2 2
In March 2022, consumers’ confidence felt back to its historically low level of April 2020. Rise in energy prices, high inflation and the Russian invasion of Ukraine weighed on consumers’ confidence. They especially fear a strong decrease of the Luxembourg economic growth and they are more worried about their own financial situation and they could delay important spending’ decisions. Similar prior fall dated back from the COVID-19 outbreak where retail activity was subdued. The current context is very different though could negatively impact retail sales, with a potential deceleration of the retail letting activity in the coming months.
M A R K E T B E AT
Luxembourg Retail Market Retail Q1 2022 Food & Beverage operators represent more than 50% of the deals this quarter.
Distribution of the number of deals by retailers’ typology
The Food & Beverage sector continues its fast expansion all across Europe as well as in Luxembourg. On the 17 deals recorded in Q1, 9 are done by F&B operators, Pitaya, Pokawa or Prêt-à-Manger amongst others. This sector is expected to record solid performances in the coming years, following the shift in consumers’ habits and their increasing willingness to spend money to do things rather than to buy things. Retail spending in F&B are set to increase by 40% by 2026 across Europe, confirming consumers’ attractivity for this specific market segment.
2 1 1 1
The rest of the deals are well balanced between the different market typologies, though a perspective on the first 3 months of the year is not sufficient to give strong trends.
9 1
Prime rents still expected to rise in the coming months despite current context. In the High Streets segment, prime rents stand at 140 EUR/sq m/month after several corrections observed since 2017. According to our latest forecasts, prime rents should remain stable in 2022 and observe new growth as from 2023 (reaching 142.5 EUR) up to 2025 to reach around 145 EUR / sq m / month. In the Shopping Centre segment, prime rents stand at 90 EUR / sq m / month and are not expected to increase before 2023. They should however reach the 100 EUR/sq m/month cap back in 2025. Conversely to the High Street and Shopping Centre, the Out-of-Town retail has been less impacted by the COVID-19 outbreak. Prime rents recorded a slight growth in 2021 to reach 22 EUR / sq m /month. Despite a very robust market dynamic, no changes are forecasted in 2022 and Out-of-Town retail prime rents should follow the same path than the other market segment and will rise gradually as from 2023 to reach 26 EUR / sq m / month by 2025.
2
Food & Beve rage
Servi ces
Fashi on
Spo rts & Lei sure
Sup ermarke t
Oth ers
He alth & Beau ty
Prime rents evolution by segment (EUR / sq m / month) 25 0 20 0 15 0 10 0 50 0 20 16 20 17 20 18 20 19 20 20 20 21 Q1 22 20 23 20 24 20 25 Sho ppi ng cen tre
Mai n Stre et
Out-of-To wn
M A R K E T B E AT
Luxembourg Retail Market Retail Q1 2022 No retail investment deals recorded in Q1 2022. Uncertainties could potentially lead to greater cautiousness. No deal on the retail investment market was recorded in Q1 22. The low level of investment observed these last years was mainly due to a lack of retail opportunities in the Luxembourg market. Indeed, since 2018, only one transaction has been observed in the High Street segment the sale of the Grand-Rue 79 in Q2 2021. The lack of opportunities impacted the activity as landlords tend to hold their position.
Retail investment volumes by segment (MEUR) 10 0 90 80 70 60 50 40
Prime yields expected to remain stable in the medium-term despite rising interest rates.
30 20
High Streets and Shopping Centres prime yields were revised on the upward due to the COVID-19 outbreak. No changes were observed in Q1 22. They respectively stand at 3.75% (coming from 3.25% at the end of 2019) and 6% (compared to 5.15% at the end of 2019, mainly due to growing concerns of investors for this asset class). However, as the Luxembourg occupational retail market shows a strong resilience and good performances despite unprecedented context, prime yields in these two segments are expected to remain stable in the medium-term as they should witness no changes up to 2025, despite growing concerns on the European geopolitical landscape and rising interest rates. Prime yields in the Out-of-Town segment have not been impacted by the COVID-19 outbreak and are perfectly stable since 2017 at 6%. They should remain at this level in the coming years.
10 0 20 16
20 17 20 18 Sho ppi ng Ce ntre
20 19 20 20 20 21 Q1 202 2 Mai n Stre et Out-of-To wn
Prime retail yield evolution 6,5% 6,0% 5,5% 5,0% 4,5% 4,0%
The Luxembourg retail market will continue its mutation in the coming months.
3,5% 3,0%
Mai n Stre et Out-of-To wn
20 25
20 24
20 23
20 21 Q 1 22
20 20
20 19
20 18
2,0% 20 17
Growing concerns related to energy prices, inflation and geopolitical tensions could contribute to a deceleration of the retail activity, both on the occupational and investment market, across Europe in the coming months. However, Luxembourg shows a strong resilience to shocks, with robust performances expected on the different real estate markets in the country.
2,5% 20 16
The Luxembourg retail market is changing, with an increase of online retail sales (around 9% growth last year according to provisional figures) and a continuous growth of spending in the Food & Beverage sector amongst others.
Sho ppi ng Ce ntre
M A R K E T B E AT
Luxembourg Retail Market Retail Q1 2022 MARKET STATISTICS TAKE-UP YTD (SQM)
SEGMENT
Main Street
Luxembourg (Overall)
PRIME YIELD (%)
2,273
140
-
3.75%
606
90
-
6.00%
3,152
22
-
6.00%
6,031
-
-
-
Shopping Centre Out of Town
INVESTMENT VOLUMES (MEUR)
PRIME RENTS (EUR/SQ M/M.)
SOME LEASE TRANSACTIONS Q1 2022 CITY
PROPERTY
SEGMENT
TENANT
SIZE (SQ M)
Luxembourg
Avenue de la Gare 44
Main Street
Foot Locker
760
Luxembourg
Royal Hamilius
Main Street
Prêt-à-Manger
235
Bertrange
City Concorde
Shopping Centre
Palais des Thés
75
Luxembourg
LCO
Shopping Centre
Pokawa
60
Esch-sur-Alzette
Perspectiv’
Out-of-Town
Supermarket Match
Howald
Centre Orchimont
Out-of-Town
Freshy
*Renewals not included in leasing statistics
2,620 335
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com MARINE FETIQUE Retail Agency Luxembourg +352 661 799 407 marine.fetique@cushwake.com
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