LUXEMBOURG / Retail Q4 2023
78
YoY Chg
12-Mo. Forecast
# deals
33,1K
Luxembourg’s economy sluggish in 2023 The global economic climate has had a significant impact on Luxembourg’s economy, causing it to fall notably below the Eurozone average. Recent forecasts from Moody’s Analytics reveal that Luxembourg’s economy shrank by 0.1% on a quarterly basis in the last quarter, leading to an annual contraction of -0.86% for 2023.
YoY Chg
12-Mo. Forecast
Take-up (sq m)
However, the outlook for Luxembourg’s economy is positive, with expectations of a gradual expansion. The GDP growth is projected to be around 1.7% in 2024 and is anticipated to exceed 2.2% in 2025. The economic growth in the coming years will be primarily driven by robust domestic demand, bolstered by private consumption and investment.
Prime rent (EUR/sq m/m.)
In terms of inflation, the current rate is approximately 3%, a significant decrease from the 7.2% recorded in June 2022. This suggests that the inflation experienced was temporary. However, the risk of a potential inflation rebound remains a concern. Furthermore, core inflation, which excludes the volatile food and energy prices, continues to persist. Consequently, while central bank interest rates are projected to decline in 2024, the pace may be slower than financial markets anticipate due to the expected persistence of structural inflation.
4.15%
Turning to employment statistics, recent data from Moody’s Analytics show a consistent rise in the employment rate over the year, increasing to 5.19% from 5.09% in the third quarter. The labour market has been slowing down due to economic factors. However, recent trends suggest a minor reduction in Luxembourg’s unemployment rate, a trend that is projected to continue until 2025.
145
YoY Chg
YoY Chg
12-Mo. Forecast
12-Mo. Forecast
Prime yield (3/6/9 lease)
In the fourth quarter of 2023, the consumer’ confidence decreased once more (-14) compared to the first half of the year (-12). Although, the confidence increased during the summer months, the confidence decreased from then on. Consumers remain cautious with the current climate and are more aware about their proper financial situation.
Economic Indicators Q4 2023 YoY Chg
12-Mo. Forecast
-0.86%
GDP Growth and unemployment rate
Inflation rate
2023 GDP Growth
5.19% 2023 Unemployment Rate
3.71% 2023 Consumer Price Index
7% 6% 5% 4% 3% 2% 1% 0% -1%
7% 6% 5% 4% 3% 2% 2018
Sources: Moody’s Analytics, Statec Lux, Eurostat, January 2024 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.
2019
2020 GDP
2021
2022
2023
2024
Unemployment Rate
2025
1% 0% 2018
2019
2020
2021
2022
2023
2024
2025
LUXEMBOURG / Retail Q4 2023
Strong Q4 and Notable Main Street Activity Defines 2023 The fourth quarter of 2023 witnessed a take-up of 11,800 sq m, bringing the total for the year to 33,060 sq m in the Luxembourg retail letting market. Notably, despite the unique characteristics of 2019 and 2022, 2023 represented a stable year in terms of take-up. This figure aligns with global trends from previous years, underscoring the resilience of both the Luxembourg economy and its retail market in the midst of a challenging market environment. During 2023, out of the 77 deals observed, 43 were recorded in the Main Street segment across the country. The cumulative take-up in this category reached 14,845 sq m, surpassing the average from previous years. The Shopping Centre segment continued to be stable in the second half of 2023, registering 17 transactions as opposed to the 7 deals recorded in the first half of 2023. The total take-up for the year reached approximately 4,560 sq m, underscoring the prevalence of small lot-size transactions. On the flip side, the Out-of-Town segment has continued its relatively subdued activity in 2023, marked by a total take-up of 13,625 sq m and 17 transactions. This implies a scarcity of available surfaces and projects within this particular segment, rather than signaling any downward trends.
Take-up by quarter (000s sq m, LHS) and # deals (RHS) 140
120
120
100
100
80
80
60
60
40
40
20
20 0
0 2018
2019
Q1
2020
2021
Q2
Q3
2022
2023
Q4
# deals
Distribution of the deals by market segment 100% 80% 60% 40%
Stable Rents with Future Increases on the Horizon
20%
Since 2022, the prime rents in the three market segments have not witnessed any increase. The first increase are expected as from 2024 until 2026.
0%
In the Main Street segment, the prime rent has not witnessed any increases since the first half of 2022. The Main Street prime rent stands at 145 EUR/sq m/month and is expected to reach 148 EUR/sq m/month in 2024. In the following two years, the prime rent is expected to increase towards 158 EUR/sq m/month. The demand in city centers remains strong and is reflected in the projected increases. In the Shopping Centre segment, no changes were observed in the second half of 2023. Prime rents currently stand at 90 EUR/sq m/month and are anticipated to increase to 92 EUR in 2024. It is projected that they will continue to gradually rise in the subsequent years, reaching close to 95 EUR/sq m/month by the end of 2026. The Out-of-Town segment witnessed no further increase since 2022. The current prime rent stands at 24 EUR/sq m/month. The prime rent is expected to reach 28 EUR/sq m/month in 2026.
2018
2019
2020
Shopping Centre
2021
Main Street
2022
2023
Out-of-Town
Prime rents by segment (EUR/sq m/month) 200 180 160 140 120 100 80 60 40 20 0 2018
2019
2020
Shopping centre
2021
2022
2023
Main Street
2024
2025
2026
Out-of-Town
LUXEMBOURG / Retail Q4 2023
Cautiousness reflected in investment volumes and transactions No transactions were recorded in the fourth quarter of 2023. This brings the total number of notable investment transactions for the year to just one, with a total invested volume of 2.3 million euros in 2023. As mentioned in the first half of the year, the investment market underwent significant turmoil with very few transactions recorded. Not only did the retail market face difficulties, but the challenges also extended to other sectors, including offices. This reflects investors' cautiousness and heightened financing conditions. While the conditions have since stabilized, uncertainty persists. Normalisation is anticipated from 2024 onward, and a gradual recovery is expected to commence soon.
No changes in prime yields in Q4 2023 In all three market segments, the prime yields have not witnessed any increases since the first quarter of 2023. The Main Street segment stands at 4.15% and is expected to reach 4,30% in 2024. The prime yield for the Shopping Centre stands at 6.25% and has remained unchanged since 2022. Due to the absence of market transactions, the prime yield has not seen any alterations. It is anticipated that the prime yield will reach 6.40% in 2024 and stabilize in 2025. The Out-of-Town segment has experienced stability over several years, with the prime yield holding steady at 6%. Anticipated changes include an increase in the prime yield to 6.40% in 2024, followed by stability in 2025.
Retail investment volumes (in MEUR) 100 90 80 70 60 50 40 30 20 10 0 2018
2019
2020
Shopping Centre
2021
Main Street
2022
2023
Out-of-Town
Prime yield by segment (in %) 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00% 2018
2019
2020
Shopping Centre
2021
2022
Main Street
2023
2024
2025
Out-of-Town
LUXEMBOURG / Retail Q4 2023 Market Statistics SEGMENT
TAKE-UP 2023 (SQM)
PRIME RENTS (EUR/SQ M/M.)
INVESTMENT VOLUMES (MEUR)
PRIME YIELD (%)
Main Street
14,845
145
-
4.15%
Shopping Centre
4,590
90
-
6.25%
Out-of-Town
13,625
23
2.3
6.00%
Luxembourg (Overall)
33,060
-
2.3
-
Key Lease Transactions Q4 2023 PROPERTY
SEGMENT
TENANT
SQ M
TYPE
Garage Petrymobil Opel
Out-of-Town
Tesla Motors Luxembourg
2,868
Letting
Garage Kaufmann
Out-of-Town
Renault Luxembourg
2,250
Letting
Listo Shopping Centre
Shopping Centre
Jims Fitness
1,295
Letting
Belval Plaza
Shopping Centre
KFC
318
Letting
Gare 63
Main Street
Medi-Market
195
Letting
Origin
Out-of-Town
Eltrona
183
Letting
Key Investment Transactions 2023 PROPERTY
SEGMENT
CITY
PURCHASER
SELLER
VOLUME (MEUR)
Metzkimmert 6-8
Out-of-Town
Differdange
Private
Private
2,3
Oscar DE GROOTE Research Analyst | Belgium & Luxembourg +32 478 05 38 71 oscar.degroote@cushwake.com
Benjamin DEVIE Research Analyst | Belgium & Luxembourg +32 492 11 35 10 benjamin.devie@cushwake.com
Sebastien BEQUET International Partner | Head of Luxembourg +352 661 36 47 12 sebastien.bequet@cushwake.com
Jean BAHEUX International Partner | Head of Retail Agency +32 478 96 08 61 jean.baheux@cushwake.com A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION ©2024 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.
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