M A R K E T B E AT
LUXEMBOURG Retail Q3 2020 YoY Chg
19,050 sq m H1 2020 take-up
140 €/sq m/m. High Street Prime Rent
High Street Prime Yield Source: Cushman & Wakefield
LUXEMBOURG ECONOMIC INDICATORS Q2 2020 YoY Chg
GDP Growth
6.5% Unemployment rate
0.18% Consumer Price Index (% change) Source: Oxford Economics
ECONOMY: Rebound expected in 2021 The GDP growth is projected to fall by 3.7% for the year 2020 (revised from a sharp 6.2%), as a result of the COVID-19 outbreak. Domestic demand is expected to decline due to lower private consumption and investment, while government consumption is set to cushion only part of the fall in 2020. The fall is sharp but might seem modest compared to results reported elsewhere in the euro area. For 2021, a rebound in GDP growth to 5.4% is expected, with risks mainly on the downside should the pandemic last longer than expected. Private consumption is expected to further decline in 2020 due to the effects of the pandemic and due to the weakening of the labour market (via a higher unemployment level and lower employment growth). Unemployment is expected to increase to 6.5% for 2020 (coming from 5.6% in 2019) and 6.2% in 2021.
LETTING MARKET: Strong Q3 despite COVID-19 crisis
3.50%
-3.7%
12-Mo. Forecast
12-Mo. Forecast
More than 10,000 sq m of take-up were recorded in Q3 2020 despite the COVID-19 crisis, it’s 20% more than the activity observed the first part of the year. Year-to-date, more than 19,050 sq m of take-up and 45 deals are registered, a level perfectly in line with the 5-years average (the exceptional 2019 excepted). Main streets and shopping centres suffer more than the out-of-town retail though encouraging signs are currently observed with footfalls on a continuous upward since the end of the lockdown. However, they are still below last year levels and important disparities exist between cities and/or shopping centres. Fashion sector is more impacted than the others. Actually, we observe a rise in the sports & leisure segment as well as in the food sector as the transactions of Delhaize, Lidl and other Food & Beverage retailers confirm this quarter. Despite this activity, new corrections of the prime rents have been observed in the high streets and in the shopping centres this quarter. 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 slight increase in the coming months to stand again at 150€/sq m/month in the high streets before the end of the year 2021. However, depending on the evolution of the sanitary crisis, the situation could be very different. TAKE-UP (in 000s SQ M)
PRIME RENTS BY SECTOR (€ / SQ M / MONTH)
140
160
120
140
250
200 120
100
100 80
150
80 60 60 40
100
40 50
20
20
0
0
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1
Q2
Q3
Q4
# deals Main Street
Out of Town
Shopping centre
M A R K E T B E AT
LUXEMBOURG Retail Q3 2020 INVESTMENT MARKET: Prime yields stable for the rest of the year No investment transaction has been recorded in Q2 and in Q3. As a result, 51 MEUR have been invested in retail assets since the beginning of the year with the purchases of the Walfer Shopping Centre and the Retail Park Sandweiler respectively for 27 MEUR and 24 MEUR. Few opportunities currently exist in the market and the COVID-19 crisis could limit the investment activity. As a result, prime yields could slightly increase in the coming months as investors become more cautious regarding the market evolution.
OUTLOOK: The future of retail will be a question of location, flexibility and omni-channel strategies The COVID-19 crisis accelerate 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. However, the physical store is set to survive as it is part of consumers’ engagement and online sales are just a complement to a physical store. In the medium-term, retailers will namely need to embrace environmental considerations (both in their products and the shaping of their stores) and new technologies to adapt to the new generations. On the other side, investors could probably propose more flexibility in their lease contracts or spaces to adapt to a new normality.
CEDRIC VAN MEERBEECK Head of Research & Marketing Belgium & Luxembourg +32 2 629 02 86 / cedric.vanmeerbeeck@cushwake.com
If we forecast further slight decrease of the rents and rise of the yields in the coming months, this situation is not to stay as the market should recover gradually as from the beginning of 2022.
VIRGINIE CHAMBON Head of Retail Agency Luxembourg +352 27 21 33 04 / Virginie.Chambon@cushwake.com
MARKET STATISTICS
cushmanwakefield.com
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%
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.