Retail suffering in different degrees

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Tim Harrup

In its annual press conference on the retail sector of this morning (December 15) advisor JLL paints a picture of an industry in turmoil. While food and e-commerce are the only winners, JLL believes that where the latter is concerned, it is beginning to reach its limits and that consumers are looking forward to the social aspect of once again visiting physical stores.

Taking a look at the traditional take-up figure, the recorded level of 324,000 m throughout Belgium at mid-December is expected to rise to 372,000 m by the end of the year a decrease of 17% from the 451,000 m of 2019, and also down on the five year average of 402,000 m. These are figures which JLL considers to be not too bad given the context, and given the greater damage done to office take-up (42% down), for example. Nevertheless, some substantial completions have been observed, mostly in retail parks, totalling 157,000 m and including Frunshopping at Bertrix and Parenthse at Gosselies. Openings this year also include Quartier Bleu in Hasselt comprising 21,699 m and Turnova in Turnhout (15,000 m).

Shopping centres suffering

When take-up for the different sub-segments are analysed, JLLs estimate for the year end sees high streets at around 103,000 m, 29% down on last year and 16% down on the five year average. The segment to suffer the most is that of shopping centres, whose expected 2020 total of 27,500 m is a full 59% down on last year and 57% down on the five year average. Virtually unaffected, by contrast, is the retail warehouse segment, its 242,000 mof take-up being on a par with last year and even 12% up on the five year average.

Take-up by sector reveals that supermarkets are the only outlets to have seen an increase over the reference year of 2015 used by JLL (70,000 m against only 20,000 m). The greatest loser is the fashion segment, at 37,000 m against 112,000 m. Rents have suffered during this crisis, and as an example, the Meir in Antwerp, whose prime rent over recent years has been in the region of 1,800/m/year, has slipped to 1,600.

Vacancy and investment

Vacancy in Belgian shops rose to 9,4% from 6,2% in 2010 and is expected to rise further, creating potential for opportunistic growth and new formats, new activities and opportunities for reconversion.
Institutional investment in retail paused as a result of Covid-19 related uncertainties on rental income levels and tenant quality. Volumes at the beginning of December 2020 are 35% below those of 2019, which was, JLL points out, not an exceptional year. Retail warehousing has shown resilience and taken the lions share of the investment volume, before High Streets, whilst shopping centre transactions were extremely limited. No transaction above 50 million have been seen this year.

Outlook

Looking forward, where new premises are concerned, projects are being postponed or revised due to uncertainty surrounding demand. Retail warehousing is resilient but it is difficult to obtain permits. Other than the completions seen this year and mentioned above, JLL identifies just two major additions in 2021 Westland Shopping Centre, Anderlecht, whose existing 37,450 will increase by 12,550 m and Malinas, Mechelen at 25,500 m. However, from 2021 to 2024, a total of around 610,000 m are either at construction, refurbishment or permit request stage.

Consumer hesitation to visit retail places will lift, predicts JLL, and pent-up demand will drive retail volumes once the situation returns to normal. Retail sales are expected to shift (partially) back from online channels to physical stores in 2021, especially as the younger generation is keen to socialise once lockdown measures ease. Cautious recovery in leasing activity may be seen along with consolidation and optimisation of networks. New formats and innovation will be present and rent recovery expected from 2022 onwards.