LUXEMBOURG
Retail Market Snapshot Fourth Quarter | 2018
Overview
MARKET INDICATORS
Luxembourg economy is in rude health and resilient domestic demand offset the drag from slowing global trade. GDP growth posted a strong 3.6% this year and is expected to reach 4% in 2019. Employment growth remains robust, while the unemployment rate continues to decrease for the fifth consecutive year to reach 5% at the end of the year. Monetary policy normalization is expected to be very gradual given the concerns of the ECB to prevent shocks and should result in a strong confidence on the real estate markets in 2019.
Market Outlook Prime Rents: Prime rents decreased in the high streets recently. The outlook for the rest of the year is stable in every sector. Prime Yields: Prime yields at their historical low level in every subsector and expected to remain stable. Supply:
Limited supply in 2017, but improving from 2018 as new shopping centre projects will be delivered.
Demand:
Stable and opportunistic occupier demand, while the best stock will continue to see strong competition.
Prime Retail Rents – December 2018 € SQ.M MTH
€ SQ.M YR
US$ SQ.FT YR
Luxembourg City (Grand Rue)
180
2,160
229
-14.3
6.7
Luxembourg City (Avenue de la Gare)
90
1,080
114
-10.0
3.7
€ SQ.M MTH
€ SQ.M YR
US$ SQ.FT YR
23.00
276
2.4
CURRENT Q
LAST Q
LAST Y
10 YEAR HIGH LOW
Luxembourg City (Grand Rue)
3.25
3.25
3.25
5.75
3.25
Luxembourg City (Avenue de la Gare)
4.30
4.30
4.30
5.75
4.30
CURRENT Q
LAST Q
LAST Y
10 YEAR HIGH LOW
HIGH STREET SHOPS
OUT OF TOWN RETAIL (STAND ALONE UNITS) Luxembourg City
GROWTH % 1YR 5YR CAGR
GROWTH % 1YR 5YR CAGR 9.5
5.0
Prime Retail Yields – December 2018 HIGH STREET SHOPS (FIGURES ARE NET, %)
OUT OF TOWN RETAIL (STAND ALONE UNITS) (FIGURES ARE NET, %) Luxembourg City SHOPPING CENTRES (FIGURES ARE NET, %) Luxembourg City
6.00
6.00
6.00
7.00
CURRENT Q
LAST Q
LAST Y
10 YEAR HIGH LOW
5.25
5.25
5.25
6.00
5.50
5.25
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property.
Recent performance
Yields
Rental growth (y/y)
Yield - Country Average Yield - Prime Rental Growth - Prime Rental Growth - Country Average 40,0% 6,00% 30,0% 5,50% 20,0% 5,00% 10,0% 4,50% 0,0% 4,00% -10,0% 3,50% -20,0% 3,00% déc-08 déc-10 déc-12 déc-14 déc-16 déc-18
Occupier focus
Despite a very low Q4, the retail take-up reached more than 32,000 sq m in January 2018, the second best year since 2010. The 2,055 sq. m letting of Maisons du Monde in the shopping centre Belle Etoile is one of the biggest transaction year-to-date. The opening of the extension of the shopping centre City Concorde in November also contributed to this important take-up with 6,200 sq. m and 18 transactions. The opening of the Royal Hamilius in 2019 (with anchor tenants such as Galeries Lafayette and the Fnac) and the Auchan Cloche d’Or will have a strong impact on the retail landscape. Rents are stable compared to previous quarter, at 180€/sq m/month in the Grand’Rue, around 115€/sq m/month in the prime shopping centres and at 23€/sq m/month for prime outof-town locations.
Investment focus
The purchase of the Grand’Rue 83 by GLL for €85m in Q4 was the second transaction of the year, after the €11m purchase of the Rituals in the Grand Rue 53 by a private investor. Appetite remains strong through few opportunities currently exist in the market.
Outlook
The strong macroeconomic fundamentals should benefit to the retail sector, though the growing importance of online retail and the difficulties of the city centre put retailers under pressure on the letting market. New important retail schemes will boost the activity in the coming months. On the investment side, few opportunities exist.
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. ©2017 Cushman & Wakefield LLP. All rights reserved.
Virginie Chambon
Partner Head of Retail Agency Luxembourg +352 27 21 33 04 virginie.chambon@cushwake.com cushmanwakefield.com