M A R K E T B E AT
Luxembourg Retail Market Retail Q2 2021
YoY Chg
12-Mo. Forecast
18,000
Take-Up YTD (sq m)
Economic Overview After a limited decline in 2020, the real GDP growth is expected to bounce back to 6% on an annual basis in 2021, before moderating to 3.3% in 2022. Luxembourg’s economy performed relatively well in 2020, thanks to information and communication exports and the financial services sector. In recent weeks, the accelerating pace of the vaccination campaign and the improvement in the health situation have prompted a gradual relaxation of restrictions affecting contact-intensive services. This trend is assumed to continue in the coming months, along with a broader reopening of the economy and a likely positive effect on the retail sales.
40
Deals YTD
135 EUR/sq m/m. Prime Yield (3/6/9 Lease)
Sentiment indicators also suggest a positive outlook for Luxembourg’s economy. Business sentiment has improved, also outside the financial services sector. Consumer sentiment, meanwhile, showed a strong recovery in spring, after the dramatic fall recorded between March and the end 2020, particularly concerning expectations about consumers’ future financial situation. This is in line with an observed increase in employment, which should also support the rebound in consumption. Despite a slight increase in the unemployment rate forecasted to 7.4% this year, unemployment rate should decrease as from 2022.
ECONOMIC INDICATORS Q2 2021
Inflation is projected to rise to 2.5% in 2021 due to oil price increases, the introduction of a carbon tax, the rebound in consumption, and base effects linked to the introduction of free public transportation in 2020. However, this pressure on prices is expected to be temporary and to ease in 2022. Consequently, inflation is expected to decline to 1.7% in 2022.
Prime rent High Street
3.75%
7.4%
YoY Chg
12-Mo. Forecast
Unemployment Rate 2021
-15 -20 -25
Unemployment r at e
-30 09 -2 03 01 -2 2 09 01 -2 3 03 01 -2 3 09 01 -2 4 03 01 -2 4 09 01 - 5 03 201 -2 5 09 01 -2 6 03 01 -2 6 09 01 - 7 03 201 -2 7 09 01 -2 8 03 01 -2 8 09 01 - 9 03 20 -2 19 09 02 -2 0 03 02 -2 0 02 1
GDP Growt h
20 21 20 22 20 23 20 24 20 25
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.
-10
20 19 20 20
Source: Statec.lu, Eurostat
-5
20 18
Inflation for 2021
0
20 17
2.2%
Consumers’ confidence index 5
8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% 20 16
GDP Growth for 2021
GDP Growth (LHS) and Unemployment rate (RHS)
20 15
6%
M A R K E T B E AT
Luxembourg Retail Market Retail Q2 2021 Solid performances observed on the occupational market The COVID-19 outbreak seems to have only limited impact on the retail letting market with a year 2020 in line with last years average and a year 2021 which performs well with already 18,000 sq m of take-up recorded (righ-hand scale on the chart). Moreover, in number of deals, with 40 transactions recorded in 2021 so far, the Luxembourg retail market posted its best start to the year since 2015.
# deals by quarter (LHS) and total take-up (000s sq m, RHS) 120
140
100
120 100
80
80 60
2016 Q1
2017 Q2
2018 Q3
2019
2020 Q4
2021 Tak e-up
Take-up by market segment (000s sq m) 140 120 100 80 60 40 20 0 2015 2016 Main St reet
2017 2018 2019 2020 H1 21 Shopping Centre Out of Town
Share of the population who shop online 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% I ta ly
The most popular categories are formed by tickets for shows and events (44%), books and magasines (40%), household items (37%), electronics (25%). Food represents only 14% but is increasing.
0 2015
U et K he rl a nd Sw s ed en G er m Lu an xe y m bo ur g Fr an ce Be lg EU iu m -A ve ra ge Sp ai n
Online retail is growing every year in Luxembourg. Total revenues of e-commerce sales are estimated to 800 MEUR in 2018 and increased again in 2019. Figures for 2020 are not released yet but should have risen as a result of the COVID19 outbreak. Luxembourg is ranked 6th in Europe regarding the share of the population who shop online, behind countries such as Denmark or the UK but ahead of France or Belgium for example.
0
N
Online retail should record modest short-term growth
20
ar k
Year-to-date, the shopping centre also recorded a take-up of 3,330 sq m, namely thanks to an important activity observed in the Belval Plaza Shopping Centre. The Shopping Centre segment should continue its redevelopment in the coming months, to offer a better commercial mix and propose more F&B and Leisure activities. Indeed, Shopping Centres will need to propose a strong experience to clients to become a destination shopping and to make a difference in a competitive market. As observed in other European countries, activity in the Out of Town format increased since the COVID-19 outbreak. Indeed, in Luxembourg, the Out-of-Town is still under expansion and not yet a mature market, activity is on the rise. In H1 2021, just below 10,000 sq m of take-up has already been observed (compared to 10,000 sq m on a yearly basis in previous years), mainly driven by DIY, Deco and Furniture activities. The Out of Town format is increasingly appealing to consumers, retailers and developers. Accessibility, relatively low rents compared to the country's shopping centres and main shopping streets, the possibility of site reconversion and, in the current context, the ease of respecting social distancing between customers are all strong points of these clusters which should continue their expansion in the coming months, as the pipeline indicates.
40
20
en m
Overall, the High Street sector recorded an occupancy of around 5,000 sq m in H1 2021, already in line with the activity observed for the whole year for the 2018-2020 period. The COVID-19 crisis accelerated the trends which had already been observed in this segment before the pandemic towards new and a multitude of formats for the physical retail unit. These trends have a dual character, depending on the locations (prime or secondary city and/or streets) and also depending on the size of the retail unit. The retail landscape is currently in a profound mutation with a growing shift towards online retail, changing consumers’ patterns and demographic shifts namely. However, the Luxembourg market is resilient and also succeeded in attracting new brands on its territory such as the shoes retailer Sidestep which will open its first store in the Grand-Rue next quarter.
60 40
D
A well-balanced activity between different market sectors
M A R K E T B E AT
Luxembourg Retail Market Retail Q2 2021
Conversely to the High Street and Shopping Centre, the Out of Town is less impacted by the COVID-19 outbreak. Prime rents remained stable in 2020 and 2021, at 23 EUR /sq m/ month and are expected to slightly increase in the coming years to reach 28 EUR / sq m / month in 2024. Investment activity driven by the sale of the Cora Foetz in H1 2021 In this unprecedented context, while investors may be demonstrating greater cautiousness in terms of investments in the retail sector. Indeed, retail is increasingly a question of having detailed knowledge of the market, as well as an understanding of locations, growth sectors and the options for repurposing the property. Since 2018, no investment transactions have been observed in the High Street segment in Luxembourg, with the exception of the Grand-Rue 79 in Q2 2021 (confidential volumes). It is not so the lack of interest for this segment which explains this low level but rather the lack of opportunities as landlords tend to hold their position. Shopping Centres investment volumes are very dependent of big transactions. In Q1 2021, the sale of the Cora Foetz boosted the total retail investment volumes to 70 MEUR, the highest level since 2018. Investors are showing a growing interest in retail parks – especially when they include a food store. Despite having a lot of market evidence, we feel that this segment is going to witness increasing activity in the coming months. Slight corrections of the prime yields reflect the new normal for the retail market The fashion sector is the one that has been affected most severely by the health crisis and, as a result of the snowball effect, this is impacting value in the High Street and Shopping Centres. These are the two segments of the market where we have seen the biggest rent corrections compared with 2019.
100 50
Main St reet
Shopping centre
20 25
20 21 20 22 20 23 20 24
20 19 20 20
0 20 18
In the Shopping Centre segment, a decrease has been observed in March 2020. As observed for the High Street segment, rental levels are forecasted to rise as from 2022, though at a slower pace than for the High Streets.
150
20 17
For the High Streets, the decrease of the prime rents has already began prior to the COVID-19 outbreak in March 2020, though reinforced this correction of the rents all along 2020 and the beginning of 2021 with different decreases observed. Prime rents for the High Street segment stand currently at 135 EUR / sq m/ month. According to our forecasts, this decrease is expected to remain temporary as new rental growth are forecasted as from 2022 up to 2025.
250 200
20 16
Prime rental levels in the High Steet and Shopping Centre segments have been impacted by the COVID-19 crisis.
Prime rents evolution by segment (EUR / sq m / month)
20 15
Positive outlook for the rental levels despite unprecedented circumstances
Out of Town
Retail investment volumes by segment (MEUR) 30 0 25 0 20 0 15 0 10 0 50 0 20 15
20 16
20 17
Mai n Stre et
20 18
20 19
Sho ppi ng Ce ntre
20 20
H1 2 1
Out o f Town
Prime retail yield evolution 6,5% 6,0% 5,5% 5,0% 4,5% 4,0 % 3,5% 2,5%
Main St reet
Shopping Centre
20 25
20 24
20 23
20 21 20 22
20 19 20 20
20 18
20 17
2,0% 20 16
Conversely, Out of Town has not been impacted by the COVID-19 outbreak and should remain very stable all along the coming years, around 6%.
3,0%
20 15
Yields have also been affected in an upward direction with consecutive increases, settling at 3.75% in the country’s leading retail streets and 5.75% for the prime shopping centres. According to our forecasts, a further round of slight increases is expected for 2021 in the High Street while it should remain stable in the Shopping Centre.
Out of Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q2 2021 MARKET STATISTICS SEGMENT
TAKE-UP YTD (SQM)
INVESTMENT VOLUMES (MEUR)
PRIME RENTS (EUR/SQ M/M.)
PRIME YIELD (%)
Main Street
3,331
135
-
3.75%
Shopping centre
5,659
95
70
5.75%
Out of Town
9,273
23
-
6.00%
18,001
-
70
-
Luxembourg (Overall)
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com
SOME LEASE TRANSACTIONS H1 2021 PROPERTY
SEGMENT
TENANT
SIZE (SQ.M)
Belval Plaza
Shopping Centre
MediaMarkt
1,000
Escape Retail Park
Out of Town
Trafic
1,934
Royal Hamilius
Main Street
Atelier Steffen
333
Grand-Rue 95
Main Street
Sidestep
110
Grand-Rue 33
Main Street
Confidential
Avenue de la Gare 65
Main Street
Tezenis & Calzedonia
225
Grand-Rue 48
Main Street
Bouncewear Europe
600
Bereldange
Out of Town
Eggo
636
MARINE FETIQUE Retail Agency Luxembourg +352 27 21 33 06 marine.fetique@cushwake.com
1,150
cushmanwakefield.com
*Renewals not included in leasing statistics
INVESTMENT TRANSACTIONS H1 2021 PROPERTY
SEGMENT
Cora Foetz
Shopping Centre
Louis Delhaize / Private Belgian Investor
SELLER / BUYER
YIELD N/A
PRICE (MEUR) 70
Grand-Rue 79
Main Street
Prowinko / Private Luxembourg Investor
N/A
N/A
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 52,000 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.
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