A look back at the year 2020 and the outlook for retail in Belgium in 20212020 was an extraordinary year in every respect. The global pandemic caused by COVID-19 had a significant impact on the global and local economy, affecting all sectors of activity. Lockdown, mandatory teleworking, and repeated closures of shops, bars, restaurants and theatres were all events which forced us to adapt and change our lifestyles and consumption patterns. The impacts on the various players and sectors of the real estate industry have been manifold.
1. The occupation market: globally less impacted than expectedThroughout 2020, a plethora of articles depicted an apocalyptic situation for the retail sector: changes in consumption patterns, an explosion of online shopping, a dramatic drop in footfall in shopping streets and shopping centres, retailers going bankrupt, turnover plummeting, negotiations on rent discounts between tenants and landlords, etc.
There was indeed a slight decrease in the overall level of activity in terms of occupancy. -10% of retail space was let, meaning 16% fewer transactions than in 2019 (which was an exceptional year). These figures are good overall, and are better than was expected at the beginning of the pandemic. However, they reflect important differences according to the sectors in question (see below). The impact on rents is also very varied.
According to Jean Baheux, Head of Retail Agency: “The impact of the health crisis has created a "communicating vessels" effect in household consumption, with less spending in the personal equipment sector and more in household equipment, sports equipment and the food sector. This explains why the market has not generally fallen as much as was feared at the beginning of the crisis".
2. Out-of-town retail has the wind in its sails and demonstrates fine future prospectsIn a market which is being forced to reinvent itself, out-of-town retail has shown great resilience and saw an increase in occupancy of almost 20% in 2020. The take-up is at an all-time high of 255,000 sq m, distributed over more than 250 transactions across the country.
Jean Baheux, Head of Retail, confirms: "The presence of essential shops (supermarkets, food stores, but also DIY and garden centres) obviously acted as a catalyst for these good results. But beyond this, it is in reality the format of out-of-town retail which 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.”
Out-of-town retail therefore has a bright future ahead of it, as confirmed by the development pipeline currently underway in the country and the growing interest in this type of format.
This format may be perfectly suited to the increased use of click & collect and the desire of retailers to get closer to their customers. Out-of-town retail could therefore play a decisive role in the realisation of an omni-channel strategy for retailers, in particular thanks to the increased storage possibilities.
Finally, it should be noted that out-of-ton retail was the only branch to record stable rents in 2020 despite the reduction in traffic following the various closures of non-essential shops. Prime rents currently stand at €160/sq m/year and are set to rise to €170 by 2023.
3. Shopping centres were the most affected, but are expected to recover in 2021Unsurprisingly, following their almost complete closure during the first and second lockdown, shopping centres were the most severely affected by the COVID-19 crisis. Only 45,000 sq m of take-ups were recorded throughout 2020, a decrease of almost 45% compared to 2019.
In fact, the "fashion" sector, which is usually the driving force behind shopping centres, has been the most affected. It has experienced a sharp reduction in commercial spending, growing pressure from online shopping and a significant drop in take-up. The complete closure of cafés and restaurants is also a heavy blow to shopping centres, especially those which had adopted a new commercial mix favouring the "shopping experience" and leisure activities with a purely consumer purchase-oriented logic.
While the situation for the coming months might look difficult, Kurth Marissens, Head of Shopping Centres Agency, remains confident: "The shopping centre format will continue to evolve towards greater integration with the Food & Beverage and leisure segment. Many F&B stores are being created or expanded in our country despite the COVID-19-related difficulties, and this trend will continue in 2021. Furthermore, the sports sector is a new driving force for shopping, as demonstrated by the rapid expansion of sneakers’ brands such as Snipes, JD Sports and Courir".
Rents have been severely impacted by successive closures. They fell by 15% on average for the premium segments (to €1,150/sq m/year for the best shopping centres), and by up to 30% for the more difficult locations. However, our forecasts indicate a gradual recovery in rental values from 2022 onwards. Prime rents could thus return to pre-crisis levels by the end of 2023.
4. Twin developments for the High Street, heralding differentiated outcomes in 2021
Overall, the High Street sector recorded an occupancy of around 110,000 sq m over the year, a 30% decrease compared to 2019. The COVID-19 crisis has strongly accelerated the trends which had already been observed in this segment before the epidemic. These trends have a dual character.
Indeed, it seems clear that the size of the retail units plays a major role in their real estate dynamics, both in terms of interest on the part of retailers and in terms of rental values. Generally speaking, small retail units of less than 200 - 250 sq m continue to be let at rents 15% lower than those of the end of 2019 (prime rents are now €1,550/sq m/year at Meir in Antwerp and Rue Neuve in Brussels, compared to €1,800 at the end of 2019. They were still at €2,000 in mid-2018).
Large units are suffering more, remaining empty for longer or being rented at 30 to 50% lower values than previously. However, it should be specified that the COVID-19 crisis is not the only underlying reason for this - it has merely accelerated the trend observed since 2018.
However, value forecasts are positive for the coming years, as we should see a slight increase in values from the year 2023 onwards (mainly for small and medium-sized units).
Jonathan Delguste, Head of High Street Retail Agency, explains: "Everything has become a question of nuance in the High Streets sector. While previously, location within the same city was important, it is now micro-location within a street which is paramount. Just like the size and shape of the shop, this can lead to substantial differences in values. Customer experience is also critical to the success of a shop.”
Like shopping centres, the experience (and the pandemic safety aspect) are essential elements for the success of tomorrow's shopping streets. Unlike shopping centres, however, the multitude of owners means that the public authorities need to participate in the design of public spaces. A real partnership between owners, public authorities, retailers and consultancy firms such as Cushman & Wakefield must therefore be created to develop a genuine renewal of the country's commercial thoroughfares, which will be beneficial for the revival of urban life.
5. How can we help you?
In these extraordinary times, we are more than ever at your side to support you in all your endeavours.
We have been the market leader1 for many years and we reinforced our leading position in 2020 with a team of experts, an undisputed knowledge of the market, and the development of new service lines.
Don’t hesitate to contact us for any questions related to your commercial property:
- Renew or negotiate your lease,
- Understand where your potential customers are situated,
- Analyse and optimise the performance of your shops
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1 Based on the annual ranking published by Expertise News on 14 January 2021
Preparing retail actors for the new normal
Without a doubt, our world will be forever changed by the COVID-19 pandemic. Economic data suggest the Belgian economy will be severely hit in 2020 with a GDP decline around 7.8% External Link. The economy is expected to rebound in 2021 with an GDP growth of 5.6%, though risks and uncertainties on the downside remain high due to the current evolution of the sanitary crisis and its consequential partial containment measures. Concerns about unemployment remain high while consumers confidence is at this lowest level over the last two years.
In this context, total retail spending is set to decrease in 2020 compared to 2019 with a direct impact on the turnovers of retailers. The evolution of the COVID-19 crisis and the recent containment measures decided by the Government until the 13th December the soonest will also hit the retail market, and more specifically fashion and food & beverage activities.
Retail activity is under pressure
Year-to-date, roughly 300,000 sq m of take-up is recorded on the Belgian retail market, a 10% to 15% decrease compared to same period last year, with very different impacts depending on the sectors and/or retailers’ typology.
Some key takeaways are namely:
Shift to stores closer to home
Out of town retail is doing better than main streets and shopping centres
Fashion is struggling while sports & leisure products are booming
Food & beverage operators embrace takeaway and home deliveries
Retail footfall on a rollercoaster
The lockdown of March till May had dramatic consequences on the retail footfalls, with almost no traffic in the streets, shopping centres or out-of-town retail. While gradual encouraging signs were observed with footfalls “only” 20 to 30% below 2019 levels in October, the new containment measures currently in place put a new stop to this recovery and will negatively impact retailers activity and turnovers.
Growth of online retail
According to latest figures on online retail released in August 2020, Belgians rather shop in a physical store. However, online retail is exponentially growing (mainly thanks to a larger choice and better prices) since many years and witnessed a strong boost during the first lockdown, especially for fashion and accessories which observed a 20% growth. Food retailers also benefit from this rise of the online retail.
Still according to this report, close to 50% of the consumers favor brands which have developed an omnichannel strategy External Link, combining online sales with a physical store as they are considered as trusted brands.
Rents on the downside since the beginning of the year
Downward movements were already observed in 2019 in different Belgian retail high streets. The COVID-19 crisis contributed to reinforce this trend and also downgraded the prime rental levels of the shopping centres and out of town retail. They stand respectively 15%, 10% and 5% lower than the same period last year.
Prime Rents (€/sqm/year)
Situations are obviously very different depending on the city, the street and even the location within the same street or the shopping centre. In some specific cases, rental levels are 30% to 40% lower and the bigger units have more difficulties to find new tenants.
However, if rental levels are expected to remain relatively stable next year, we still forecast increases as from 2023. Actually, even if experiencing unprecedented challenges, the physical store is set to survive as it is part of a consumer’s engagement and online sales are only a complement.
Restoring retail confidence
The COVID-19 crisis accelerates 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 new strategies.
In this moment, it is critical that retailers look forward and deploy new strategies. As retailers develop plans to re-open, re-engaging the consumer is going to be more complex, involving new safety and health standards, and developing a greater sense of mutual trust. Brands should begin to build communications and operational plans as from now to be positioned for success when they can reopen doors.
To be prepared for the new “post COVID-19” world, retailers should need to consider:
- Addressing the Store Environment: Retailers will need to review every aspect of the store environment from its size to fixture spacing to ventilation. A safe shopping experience means no more tight aisles, repositioning of high traffic areas and developing strategies to adjust for the number of customers in a store at one time. The challenge will be returning to normal levels of productivity while balancing the safety of customers. Click & collect or shipping from local stores will need to be successfully implemented to help drive physical sales.
- Integrating and Implementing Technology: Understanding how to provide a “touchless” environment in order to mitigate the spread of germs is going to be paramount. Touchless technology will need to be integrated into the store experience and check-out process. Artificial intelligence and virtual reality will help consumers see themselves in everything from clothing to eyeshadow and lipstick. These investments will need to be thoughtfully integrated to increase and enhance a brand’s experience.
- Utilizing Data and Analytics: CRM, mobile, and industry data will be critical to understanding the consumer’s preparedness to return to stores, malls, gyms, and movie theaters. Using this data, brands can engage consumers, listen to their concerns, and proactively address their needs. Data from third-party providers will give retailers advantages in the marketplace. This includes loyalty insights on products to drive inventory efficiency and margins, labor and operational statistics to reduce store costs, and portfolio optimization and store rationalisation.
- Introducing flexibility: retailers and retail owners need to work together to find the most relevant solutions to go through this unprecedented crisis. Introducing more flexibility regarding the leases and/or the rents could be profitable for both.
The new normal for the retail landscape
It is certain that the world will forever be changed by this pandemic. It is also certain that retailers will re-strategise, re-engineer, and re-invigorate their business to meet new standards and expectations.
Forward-thinking brands who start making these considerations now will be poised to win when consumers enter stores again. As our admired Fred Rogers said, “Often when you think you are at the end of something, you are at the beginning of something else”.
Despite this particular context, we can help preparing retail actors for the new normal thanks to our set of high-performance tools and our unrivalled market knowledge.
Discover our different packages below if you want to rethink your retail strategy, improve your portfolio optimization, talk about rental renegociation and much more...
Customer and Market Mapping
A visual display of the optimal locations for an occupier, identified by an assessment of demand, supply and competition. Detailed customer analysis to help brands understand who they are targeting and where similar, potential customers are located. Include:
❖ Catchment areas and drivetimes
❖ Population, demographic profiles, expenditures
❖ Market segmentation
Store performance and/or site specific assessment
Framework to understand key drivers of performances and efficiently assess the store or site performances and market potential based on different data items. Complementary to the Starter package, the Premium package includes:
◆ Location type, demand and supply, competitor and complementary operators
◆ List of recent comparables
◆ Rental analysis
◆ Hotspot maps showing areas of saturation and gaps of opportunity
Comprehensive market knowledge to support the decision-making process (market entry, expansion and/or portfolio optimisation). Complementary to the Premium Package, the Ultimate package covers our full range of services:
✤ Optimal rents definition depending on the location and retailers’ specificities
✤ List of recent comparables
✤ Weighted ranking matrix of individual markets based on a combination of data items
✤ Commentary on availability of properties
✤ Analysis of actual sales data from existing retail units to quantify the value of custormers by average spend and sales by category / channel (collaboratively with the retailer)