M A R K E T B E AT
Luxembourg Retail Market Retail Q4 2021
YoY Chg
12-Mo. Forecast
31,495
Luxembourg’ economy performs better than forecasted. In 2021, economic growth increased to close to 7% which means that for the first time since the outbreak of the COVID-19 pandemic, the pre-crisis level of economic activity was reached and even exceeded. Growth levels should stabilise to 2.5% in 2022 and 2023 and around 2.7% in 2024 and 2025.
Take-Up 2021 (sq m)
76
# Deals 2021
The unemployment rate stood at 5.6% in the last quarter and is expected to stabilise around 5% in 2022 and 2023.
140 EUR/sq m/m.
Inflation on the rise in 2022.
-
3.75%
Prime Yield (3/6/9 Lease)
ECONOMIC INDICATORS Q4 2021
5.6%
YoY Chg
Core inflation in Luxembourg stands at 2.2% for 2021 and is projected to increase sharply to 3.3% in 2022 before observing new decline to 1.4% in 2023. This is due to the fact companies are confronted with rising commodity prices which puts pressure on their price paid by the end consumer. Combined with the fact that consumer spending is set to increase after a record year of saving, inflation is set to rise. Consumers’ confidence on the downside in Q4.
12-Mo. Forecast
Unemployment Rate 2021
6.9%
GDP Growth for 2021
2.2%
Inflation for 2021
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.
After having increased sharply from February to September 2021 on the back on the back of a successful vaccine rollout in Luxembourg, along with the relaxing of constraining measures surrounding COVID-19, consumer confidence index is again on the downside since October. The Luxembourgish population is more cautious namely due to the different variants of the COVID outbreak and growing energy prices. GDP Growth (LHS) and Unemployment rate (RHS)
Consumers’ confidence index 5
8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3%
0 -5 -10 -15 -20 -25 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 GDP Gro wth
Un empl oymen t rate
-30 01 -2 0 07 15 -2 0 01 15 -2 0 07 16 -2 0 01 16 -2 0 07 17 -2 0 01 17 -2 0 07 18 -2 0 01 18 -2 0 07 19 -2 01 019 -2 0 07 20 -2 02 01 0 -2 0 07 21 -2 0 01 2 1 -2 0 22
Prime rent High Street
M A R K E T B E AT
Luxembourg Retail Market Retail Q4 2021 Robust activity in Q4 drives the take-up above 30,000 sq m in 2021. A strong 8,500 sq m of take-up has been recorded on the Luxembourg retail market in Q4, despite unprecedented circumstances. A very stable retail activity all along 2021 brings the total take-up to more than 30,000 sq m. This is the highest level of the last decade (with the exception of the atypical 2019). The strong economic recovery and the positive socio-demographic forecasts probably act as a catalyst for retailers to enter or expand in the Luxembourg retail landscape.
Take-up by quarter (000s sq m) 14 0 12 0 10 0 80 60 40
An impressive 76 deals recorded in 2021, the second highest level of the decade.
20 0
Activity is not only driven by an important amount of surfaces let but we also observed an increasing number of deals on the Luxembourg retail market since 2018. The COVID outbreak has only a limited impact on the market, conversely to some other European cities where we observed a 50% decrease of the activity and an important negative impact on the rental levels. This rising activity in the retail segment is due to several factors and varies depending on the market segment or retailer’s typology. Indeed, while some retailers are still seeking to define their (omnichannel) strategy and optimise their portfolio, we observe a strong increase in the Food & Beverage sector, both for existing retailers and newcomers. Some international retailers also entered the retail market in 2021 as Luxembourg offers robust economic fundamentals and interesting outlook.
20 15
20 16
20 17 Q1
20 18 Q2
Q3
20 19
20 20
20 21
20 20
20 21
20 20
20 21
Q4
# deals by quarter 12 0 10 0 80 60 40
Out of Town retail represents close to 60% of the take-up this year. Overall, the High Street sector recorded an occupancy of around 9,900 sq m in 2021, the best level observed since 2015. 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 more retailers could be attracted in the coming years.
20 0 20 15
20 16
20 17 Q1
20 18 Q2
Q3
20 19 Q4
Take-up by market segment (000s sq m) 14 0
A relatively low level of activity in the Shopping Centre segment in 2021 with 4,000 sq m of take-up recorded. This level is slightly below the previous yearly average. No new shopping centres entered the market in 2021 and after the numerous deliveries observed these previous years (Shopping Cloche d’Or, Infinity), a slight compression of the activity was expected.
12 0
As observed in other European countries, activity in the Out of Town format continues to perform at full speed since the COVID-19 outbreak. 22 deals were observed, a record for Luxembourg. This represents more than 17,000 sq m of takeup in this market format, which is still under expansion.
40
10 0 80 60
20 0 20 15
20 16 Mai n Stre et
20 17
20 18
Sho ppi ng Ce ntre
20 19
Out o f Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q4 2021 Food & Beverage records a buoyant activity in 2021.
Distribution of the number of deals by retailers’ typology
Despite changing consumers’ patterns and the rise of online retail these last years, the fashion sector (clothes, shoes, jewelry…) was the most active in 2021 in Luxembourg with 16 transactions. This is very different to other European countries where the fashion sector was the most impacted due to a fierce competition of online retail.
4
The Food & Beverage sector continues its fast expansion all across Europe as well as in Luxembourg. 13 deals were observed all along the year with newcomers entering the market such as Atelier Steffen in Royal Hamilius and expanding retailers as Subway or O’Tacos. 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. This trend also contributes to a growing interest for leisure activities, though not materialised on the occupational market yet.
4 5 15 9
The COVID outbreak contributes to a growing willingness to people to take care of themselves, with a positive impact for the health & beauty segment which records 9 transactions this year in Luxembourg.
In the High Streets segment, we observed several corrections of the prime rental levels since 2017. They decreased at 135 EUR / sq m / month in Q2 2021 and recorded a slight though positive upward movement in the second part of the year to stand at 140 EUR / sq m / month at the end of the year. According to our latest forecasts, prime rents should remain stable in 2022 and observe new growth as from 2023 up to 2025 to reach around 145 EUR / sq m / month. In the Shopping Centre segment, prime rents were stable all along 2021 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 has been less impacted by the COVID-19 outbreak. After a slight correction in 2020 where prime rents were observed at 21 EUR, they 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.
13 Fashi on He alth & Beau ty Ele ctro & Tele com Di scoun te r
Servi ces Un know n Ho me & d ecora ti on DIY
Food & Beve rage Sup ermarke t Spo rts & Lei sure
Prime rents evolution by segment (EUR / sq m / month) 25 0 20 0 15 0 10 0 50 0 20 15 20 16 20 17 20 18 20 19 20 20 H1 21 En d21 20 22 20 23 20 24 20 25
Slight increase of the High Streets prime rents in H2 2021. Further upward movement expected in the coming months in all market segments.
16
4
Mai n Stre et
Sho ppi ng cen tre
Out o f Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q4 2021 No retail investment deals recorded in Q4 2021, highlighting a lack of opportunities. No deal on the retail investment market was recorded in Q4. In 2021, around 80 MEUR were invested in Luxembourg thanks to the sale of the Cora Foetz for 70 MEUR at the beginning of the year. If investors may be demonstrating greater cautiousness in the rapidly changing retail landscape, this relatively low level of investment is also due to a lack of retail opportuntiities 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 (confidential volumes). The lack of opportunities impacted the activity as landlords tend to hold their position.
Retail investment volumes by segment (MEUR) 30 0 25 0 20 0 15 0 10 0 50
As observed in other European countries, interest is increasing for the Out of Town retail schemes However, this is only materialised by one transaction in Q3 2021 with the sale of the Livingstone Delhaize transaction for an approximate 8,7 MEUR. Activity should increase in 2022 as some transactions are currently ongoing.
Prime yields expected to remain stable in the medium-term.
0 20 15
20 16 Mai n Stre et
20 17
20 18
20 19
Sho ppi ng Ce ntre
20 20
20 21
Out o f Town
Prime retail yield evolution 6,5%
High Streets and Shopping Centres prime yields were revised on the upward since the beginning of the COVID-19 outbreak. 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.
6,0% 5,5% 5,0% 4,5% 4,0%
A new paradigm for the retail market is emerging. The COVID-19 outbreak contributed to a profound shift in the way we work, live and shop. On the retail market especially, we observe important changes in consumers’ patterns, directly linked to profound socio-demographic shifts. The Luxembourg retail market is changing, with an increase of online retail sales (as observed everywhere in Europe) and a continuous growth of spending in the Food & Beverage sector amongst others. Retailers need to (re-)define their (omni-)channel strategy with a potential impact on their real estate. However, in this context, the Luxembourg market is expected to continue to record robust performances as macreoconomic fundamentals are strong, demographic growth is important and purchasing power is amongst the highest in Europe, with potential positive impacts on the retail activity.
3,5% 3,0% 2,5% 2,0% 20 15 20 16 20 17 20 18 20 19 20 20 H1 21 En d21 20 22 20 23 20 24 20 25
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, though the sale of the Livingstone Delhaize suggest an important compression when a food retailer is present. For example, this transaction shows a yield at 4% and confirms investors’ willingness to buy food retail.
Mai n Stre et
Sho ppi ng Ce ntre
Out o f Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q4 2021 MARKET STATISTICS TAKE-UP YTD (SQM)
SEGMENT
INVESTMENT VOLUMES (MEUR)
PRIME RENTS (EUR/SQ M/M.)
PRIME YIELD (%)
Main Street
9,867
140
-
3.75%
Shopping Centre
4,070
90
70
6.00%
17,557
22
8,7
6.00%
31,495
-
78,7
-
Out of Town Luxembourg (Overall)
SOME LEASE TRANSACTIONS Q4 2021 CITY
PROPERTY Boomerang Shopping Centre
Strassen Differdange
SEGMENT
TENANT
SIZE (SQ.M)
Out of Town
Colruyt
1,805
Out of Town
Lidl
1,500 1,600
Capellen
Escape Retail Park
Out of Town
Chaussea
Kirchberg
Serra
Main Street
Subway
Cloche d’Or
LCO
Shopping Centre
K-Way
Luxembourg City
Grand-Rue 79
Main Street
Samsoe & Samsoe
130 110
*Renewals not included in leasing statistics
INVESTMENT TRANSACTIONS IN 2021 DATE
PROPERTY
SEGMENT
SELLER / BUYER
YIELD
PRICE (MEUR)
4.00%
8,7
Q3 21
Livingstone Delhaize
Out of Town
Immobel Luxembourg / Private
Q2 21
Grand-Rue 79
Main Street
Prowinko / Private
-
-
Q1 21
Cora Foetz
Shopping Centre
Louis Delhaize / Private
-
70
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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