Retail on a positive path

RETAIL
Tim Harrup

The real estate segment which perhaps most closely and immediately reflects the sentiments of the population in economic terms is retail. Advisor Cushman & Wakefield has just published its report on the state of the market in 2022, with encouragingly positive findings. C&W starts by saying that after two years of ups and downs, marked by the Covid-19 pandemic in 2020 and booming economic activity following the post-crisis rebound in 2021, 2022 might have been somewhat expected to be a regular year. But in the end, 2022 was an unusual year from every point of view.

Take-up, first of all, hit a new record in 2022. Letting activity reached new summits in the fourth quarter with close to 230,000 m of take-up recorded, namely thanks to important transactions in the Out-of-Town Retail segment. For example, a new 14,000 m garden centre is scheduled in Namur. For the whole of2022, take-up stands at a historically high 582,000 m. An impressive number of transactions was observed in the fourth quarter with more than 400 deals recorded. This confirms the strong market dynamics witnessed in the previous quarters. As a result, the 1,000 deals cap has been reached for the second consecutive year.

More than 1,000 deals observed in 2022

Strong performances have been observed in the Out-of-Town Retail segment which recorded a 10% increase in number of deals compared to 2021. With 350 transactions and a total take-up close to 380,000 m, this specific segment is the major contributor to the letting activity. Activity is also higher in the High Streets segment with close to 490 transactions observed throughout 2022. This is a 5% increase compared to 2021. The High Streets segment confirmed in 2022 a kind of revival of interest from retailers to locate in the best locations and assets. Activity in the Shopping Centres decreased in number of deals, but saw a strong increase in terms of take-up. Take-up in the centres reached a high 82,000 m namely thanks to the reopening of the Westland Shopping Centre in Brussels and the opening of new flagship stores such as KIABI in the Shopping Centre Les Bastions in Tournai or Nike in Wijnegem Shop Eat Enjoy.

Positive outlook expected for the prime rents in 2023

Prime rent by sector (EUR/m/year) were stable in the fourth quarter after have moved up earlier in the year. Inflation is pushing rental levels on the upward for existing leases as it reached 9.7% in 2022 and is set to stand at a high 7. 4% in 2023. As a consequence of important rental increases, retailers could decide to move and sign new leases at market levels, sometimes in buildings offering better environmental performances (to benefit from energy savings). Prime rents for the High Streets segment stand now at 1,600 /sq m m/year in Brussels (Avenue Louise and Rue Neuve). The other High Streets of the country also recorded some increases this year, namely Ghent where the Veldstraat now shows a prime rent of 1,450 /m /year. According to C&W forecasts and despite uncertainties, stability is expected next year and prime rental levels should rise rise gradually to reach 1,675/m/year in 2025. In the Shopping Centre segment, prime rents also increased in 2022 to reach pre-COVID levels 1200/m/year. Stability is also expected all along 2023 as the context remains currently uncertain. Should the economic outlook follow the most recent forecasts, prime rents could rise again as from 2024 to reach 1,275/m/year by the end of 2025. Benefitting from robust performances on the occupational market, prime rents increased to 170/m/year at the beginning of the year. They are expected to increase faster than in the High Streets and Shopping Centres and should stand around 80/m/year in 2025.

Recovery on the investment market

Thanks to a strong year-end, the total invested volumes in 2022 finally reached more than 730 million Euros. More than 100 deals were witnessed all over the year, the highest level since 2018. No transaction was observed in the Shopping Centre segment. In the fourth quarter, several important transactions were witnessed in the High Streets segment, namely the sale of the Hotel Metropole in Brussels including its retail portion (the ZARA on the Rue Neuve) for an estimated 60 million Euros by Lone Star, the purchase of the retail part of the Antwerp Tower for around 35 million Euros and the acquisition of the 11,500 m of Korenmarkt 1 in Ghent by QRF for around 21 million Euros. Globally in 2022, the total invested volumes in the High Streets segment reached around 320 million Euros. The Out-of-Town segment reached a total investment volume around 410 million Euros for the whole 2022 thanks to robust activity observed all along 2022. In the fourth quarter, five transactions for a total above 43 million Euros were recorded.