Q1-2021 | Retail Marketbeat | Belgium

M A R K E T B E AT

BELGIUM Retail Q1 2021 YoY Chg

96,000 sq m

12-Mo. Forecast

Belgian economy will recover gradually in 2021 Economic growth has been severely hit in 2020 due to higher unemployment, subdued external demand and a limited fiscal response. GDP contracted by around 8% last year. It should observe a strong rebound in 2021 (around 3.5%) and remain positive, though at a gradually decelerating rate up to 2023.

2021 YTD Take-up

1,600 €/sq m/y.

The unemployment rate was on the rise in 2020 and will be especially rising in 2021 as a direct consequence of the COVID-19 outbreak. According to latest forecasts, Belgium should lose more than 56,000 jobs in 2021. As from 2022, situation is expected to improve with new job creations (close to 46,000 in 2022 and 47,000 in 2023). As a result, unemployment should decrease gradually to stand at around 6.7% at the end of 2023.

High Street Prime Rent

4.25%

High Street Prime Yield

Core inflation in Belgium stands at 0.4% in 2020, well below the 2% ECB target. It should be around 1.7% for 2021 and 1.9% for 2022 and 2023.

Source: Cushman & Wakefield

BELGIAN ECONOMIC INDICATORS 2021 FORECASTS YoY Chg

12-Mo. Forecast

3.5%

The average disposable income of the household recorded a strong decrease in 2020, around 6%. The situation should be better as from 2021 with an average disposable income on the rise all along the period up to 2023. Consumer confidence declined in 2020 as a result of COVID-19 outbreak and successive lockdowns. The situation has been similar to the period following the economic crisis of 2007 with very negative confidence. Since the end of the year 2020, the situation is however improving and consumers’ confidence is back to pre-COVID 19 levels.

2021 GDP Growth

7.4% Unemployment rate

1.7% Consumer Price Index Source: National Bank of Belgium and Eurostat, April 2021

GDP GROWTH AND UNEMPLOYMENT RATE

HOUSEHOLD AVERAGE DISPOSABLE INCOME GROWTH

10 %

3%

8%

2%

6%

1%

4%

0%

2%

-1%

0%

-2%

-2%

-3%

-4%

-4%

-6%

-5%

-8% 20 15

20 16

20 17

20 18

20 19

20 20

20 21

20 22

20 23

-6% -7%

GDP Gro wth

Un empl oymen t rate

20 15

20 16

20 17

20 18

20 19

20 20

20 21

20 22

20 23

M A R K E T B E AT

BELGIUM Retail Q1 2021 Best start to the year since 2016 for the retail market The year 2021 started strongly, with already 96,000 sq m of take-up and 176 deals recorded. This is the strongest start to the year since 2016, despite the pandemic.

In 2021 so far, more than 30 deals have been observed in Brussels, a level similar to the 2015 – 2019 period.

The same goes for the take-up as currently around 12,000 sq m have been observed, perfectly in line with usual level for the capital. Wallonia records strong performances in 2021, mainly thanks to important lettings in the retail park La Couvinoise. More than 30,000 sq m of take-up is already recorded in Wallonia. Activity in Flanders is just below the average at the time being. Currently for 2021, around 50,000 sq m and 83 deals have been recorded.

Out of Town Retail is the preferred format in Q1 Unsurprisingly, following their almost complete closing during the first and second lockdown, Shopping Centres and High Streets were the most severely affected by the COVID-19 crisis in 2020. As the recovery is slower than expected, retailers remain more cautious to expand in these segments at the time being. As a result, takeup is relatively limited in Q1 2021, around 12,000 sq m in the High Streets and 20,000 sq m in the Shopping Centres. Conversely, out-of-town retail witnessed a record year in 2020, both in terms of take-up (245,000 sq m) and in number of deals (246 deals recorded). The presence of essential shops (supermarkets, food stores, but also DIY and garden centres) obviously acted as a catalyst for these performances. But beyond this, it is the format 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.

TAKE-UP BY QUARTER (000s sq m) 45 0 40 0 35 0 30 0 25 0 20 0 15 0 10 0 50 0 20 15

20 16

20 17 Q1

20 18 Q2

Q3

20 19

20 20

20 21

20 20

20 21

Q4

TAKE-UP BY SEGMENT (000s sq m) 45 0 40 0 35 0 30 0 25 0 20 0 15 0 10 0 50 0 20 15

20 16

20 17

Out o f Town

20 18

Hi gh Street

20 19

Sho ppi ng Ce ntre

MOST ACTIVE SECTORS IN Q1 2021 (# deals)

Decoration, Home furniture and Food & Beverage are the most active sectors in Q1 Following the trend observed last year, retailers active in decoration, hobbies and home furniture (Maisons du Monde, JYSK, 4 Murs, Sleepworld…) are the most active in Q1 2021 with more than 15 deals recorded across the country.

The Food & Beverage sector is amongst the most active despite the challenging situation imposed by the COVID-19 outbreak. The potential reopening of the terraces early May could be much needed news for this specific sector. In the meantime, F&B operators continue to expand or to develop new concepts and propose innovative takeaway solutions to promote their concepts.

De co & H ouse hol d Fashi on He alth & Beau ty F&B Spo rts & Lei sure Sup ermarke t Ele ctro & Tele com Di scoun te r Jew elry & Accessori es Perfume s DIY 0

3

6

9

12

15

18

M A R K E T B E AT

BELGIUM Retail Q1 2021

Prime rental levels have all been impacted by the COVID-19 crisis. However, the evolution is different depending on the segment concerned.

For the High Streets segment, the decease of the prime rents had already begun prior to the COVID-19 outbreak. Indeed, prime rents stood at 2,000 EUR/sq m/year back in 2017 and 2018 and began to record downside movements in 2019 already. The COVID-19 outbreak reinforced this correction of the rents throughout 2020 with different decreases observed. Prime rents for the High Street segment stand currently at 1,600 EUR/sq m/year. According to our forecasts, they should record a new slight decrease in 2021 to reach 1,550 EUR/sq m/year. However, this decrease is expected to remain temporary as new rental growths are forecasted as from 2023.

In the Shopping Centre segment, a decrease has been observed in March 2020 and has remained stable since then at 1,150 EUR/sq m/year. A second downward movement is expected during 2021. As observed for the High Street segment, rental levels are forecasted to rise as from 2022 – 2023.

PRIME RENT BY SECTOR (EUR/SQ M/YEAR) 22 50 20 00 17 50 15 00 12 50 10 00 75 0 50 0 25 0 0

25 0 23 0 21 0 19 0 17 0 15 0 13 0

20 15 20 16 20 17 20 18 20 19 Q 1 20 Q 2 20 Q 3 20 Q 4 20 Q En 1 2 d- 1 20 21 20 22 20 23 20 24 20 25

Prime rents negatively impacted in the short term, though the outlook is positive.

Hi gh Street

Sho ppi ng Ce ntre

Out o f Town R etail

Note: High Street and Shopping Centre are to be read on the left axis, OOTR on the right-hand axis

MOST PURCHASED PRODUCTS AND SERVICES ONLINE

Conversely to the High Street and Shopping Centre, the Out of Town Retail is less impacted by the COVID-19 outbreak (as also observed on the take-up figures). Prime rents decreased in March 2020, from 170 EUR to 160 EUR/sq m/year and are now expected to remain stable all along 2021 and 2022. They should increase as from 2023.

Online retail continues its exponential growth in Belgium Online retail is on the rise since many years and witnessed exponential growth during the sanitary crisis. At the end of 2019, e-commerce represented more than EUR 8.2bn in sales. If 2020 figures are not released yet, first information tend to record new increase. The share of the population which purchase online confirms this trned.

It stands at 72% at the end of 2020, compared to 60% a few years ago.

Fashi on Le isure He alth & Beau ty Travel Ele ctro nics Toys & H obb ies Boo ks Tele com Spo rt Pet fo od & accesso ries Office Su ppl ies

While the fashion sector is amongst the most impacted as far as the physical retail is concerned, it stands as a leader in the online sales. Over these last 12 months, different surveys have been made. To the question: which new products or services did you purchase online these last 12 months, close to 70% of the respondents mentioned fashion, followed by leisure and health & beauty. Food & drinks conversely are mentioned only 10% of the time.

Online retail could also be an opportunity for retailers which developed omni-channel strategies and promote a pick-up in store.

De co & Art Musi c Food & Dri nks 0%

10 %

20 %

30 %

40 %

50 %

60 %

70 %

Note: Answer to the question: Which new products or services did you purchase online the last 12 months

M A R K E T B E AT

BELGIUM Retail Q1 2021 Mixed feelings on the investment market In this unprecedented context, while investors may be demonstrating greater cautiousness in terms of investments in the retail sector, there are still some great opportunities to be snapped up. Investing in retail is increasingly a question of having detailed knowledge of the market, as well as an understanding of locations, growth sectors and the options for repurposing the property.

INVESTMENT VOLUME BY SEGMENT (in MEUR) 2 500 2 000 1 500 1 000

In Q1 2021, investment volumes recorded new decreases. They now stand at a low 120 MEUR, on a par between Out of Town and High Street. No transaction in the Shopping Centre segment has been observed this year so far as a result of greater cautiousnees of investors.

50 0 0 20 15

20 17

Out o f Town

Investment volumes so far demonstrate the regearing of investors towards Out of Town as in contrast to High Streets and Shopping Centres, which observed mixed performances, the Out of Town retail market is going full steam ahead, which is having a positive effect on the investment market. Investors are showing a growing interest in retail parks – especially when they include a food retailer.

The Out of Town is also the only segment that hasn’t seen a correction in yields. These should remain relatively stable during 2021, despite a slight decrease expected at the beginning of the year as the result of longer than expected containment measures which weigh on investors. However, despite standing currently at 5.60%, the sharpest yield observed in the Out of Town segment, when a food retailer is present, they are rather close to 5% (or even just below 5% in some specific cases).

20 16

20 18

Hi gh Street

20 19

20 20

Q1 21

Sho ppi ng Ce ntre

PRIME YIELD BY SEGMENT 7% 6% 5% 4%

The fashion sector is the one that has been affected most severely by the health crisis and, as a result of the snowball effect, this is impacting values in the High Street and Shopping Centres.

3% 2% 1%

However, it is the smaller volumes (less than 3 million euros) that generally find a positive outcome.

Transactions with larger volumes take a longer time and require more analysis to get them over the line.

0% -1% 20 15 20 16 20 17 20 18 20 19 Q 1 20 Q 2 20 Q 3 20 Q 4 20 Q 1 2 En 1 d21 20 22 20 23 20 24 20 25

These are the two segments of the market where we have seen the biggest rent corrections, around 15 to 30% compared with 2019. Yields have also been affected in an upward direction, settling at 4% in the country’s leading retail streets and 4.4% for the prime shopping centres at the end of 2020. A new yield correction has been observed in Q1 2021, the High Street segment being now at 4.25%, the Shopping Centre at 4.65%.

Out o f Town Sho ppi ng Ce ntre

Hi gh Street 10 y. Bon d Yiel ds

M A R K E T B E AT

BELGIUM Retail Q1 2021 Towards more flexibility in terms of floorspaces and leases Even before COVID-19, retailers were seeking more flexibility in the way they occupy retail spaces. Pop-up stores were mainly developed to test a market, while it was a way for the landlord to lease this space, even on a temporary basis (or it was also a way to enhance the visibility and/or the occupancy of the retail unit). Next to these pop-up stores, we see an increasing share of subleases. Indeed, some retailers, having too much spaces (as a result of online retail sales, new strategy and/or COVID-19), do not hesitate to sublease part of their surfaces. This ensures some cashflow while it could promote collaboration between brands, promote a new brand…

From a lease perspective, retailers are also willing to change their lease models by favouring shorter leases and/or agree on a turnover rent. Since the COVID-19 outbreak, retailers are negatively impacted by successve lockdowns, social distancing measures… and are looking to greater collaboration with their respective landlords (rent free periods, shorter leases…). Even if difficult for some landlords, these trends are expected to continue in the coming months as many retailers still have turnovers far below pre-COVID-19 levels and will need some support to avoid bankruptcy.

Retail will be increasingly defined by the customers’ shopping mission The traditional distinction between High Street, Shopping Centre and Out of Town Retail is going to evolve in the coming months and years and will be more and more defined by the customers’ shopping mission. Depending on their time, willingness and needs, customers will decide to spend a day out to shop / to enjoy leisure or at the other hand of the scale, will decide for a fast pick-up in a convenience store. As a consequence, there is a need for the landlord and the retailer to understand the customers’ requirements in the defintion of the retail unit and/or retail concept.

Food & Beverage sector is set to grow, despite the current situation The Food & Beverage sector experienced a strong evolution over these last years, with an important internationalisation (F&B concepts aiming to make discovering new tastes and cultures) and a gourmetisation (willingness to promote something else than just fast food).

Despite the current pandemic and the mandatory closing of cafés & restaurants, most of the recent concepts continue to expand, finding alternative solutions, mainly promoting take-away or deliveries. As observed, F&B operators are amongst the most expanding currently. It should be noted that latest figures predict a further 50% growth of the consumers’ spending in Food & Beverage by 2026.

CEDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 2 629 02 86 / cedric.vanmeerbeeck@cushwake.com

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A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. ©2019 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.