Q4-2020 | Retail Marketbeat | Belgium

M A R K E T B E AT

BELGIUM Retail Q4 2020 YoY Chg

400,000sq m 2020 take-up

1,600 €/sq m/y.

12-Mo. Forecast

ECONOMY: Belgian economy severely hit in 2020. A rebound is still foreseen in 2021.

2020 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. Rising unemployment, decrease in business and consumers’ confidence are observed. The impacts on the various players and sectors of the real estate industry have been manifold and could impact 2021.

High Street Prime Rent

LETTING MARKET: activity recorded better performances than expected

4.00%

Throughout 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, turnover plummeting, negotiations on rent discounts between tenants and landlords, etc.

High Street Prime Yield Source: Cushman & Wakefield

BELGIAN ECONOMIC INDICATORS Q4 2020 YoY Chg

12-Mo. Forecast

-6.7% GDP Growth

5.6% Unemployment rate

In 2020, take-up ended to 400,000 sq m, -10% compared to 2019. 16% fewer transactions were observed. These figures are good and globally 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 different. Out-of-town retail has shown great resilience and saw an increase in occupancy of almost 20% in 2020 with prime rents relatively stable. Conversely, high streets and shopping centres suffered more, with a decrease of letting activity around 30 to 40%. With activity on a downside and footfall under pressure, prime rents were negatively impacted in these specific segments with a drop around 15% to 20% compared to 2019.

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 DIY, household equipment, sports equipment (brands such as Snipes, JD Sports or Courir witness a rapid expansion). The F&B sector is also amongst the most active despite the different closures of cafés & restaurants during the year.

TAKE-UP BY SECTOR (000s SQ M)

INVESTMENT (MEUR, LHS) AND PRIME YIELDS (%, RHS)

500

2.500

7,0%

450

6,5%

400

0.4%

350

Consumer Price Index (% change)

250

Source: National Bank of Belgium, December 2020

2.000

6,0% 5,5%

300

1.500

200

5,0% 4,5%

1.000

4,0%

150 100

3,5%

500

3,0%

50 0

0

High Street

Out of Town retail

Shopping Centre

2,5%

Investment volumes

High street

Shopping centre

Out of Town

M A R K E T B E AT

BELGIUM Retail Q4 2020 INVESTMENT MARKET: Around 690 MEUR recorded in 2020. Yields on the upward.

In 2002, around 690 MEUR have been invested on the Belgian retail market. This is 15% below last year. Despite the pandemic, some important deals were closed over the last quarter, namely the purchase of the Olen Retail Park for around 70 MEUR, which is the biggest transaction of the year in the retail segment.

Even if investors are more and more cautious for bigger volumes and shopping centres investment files, the retail investment market remains active when convenience stores, mixed-use projects and smaller volumes are concerned.

However, prime yields increased several times over the year in the high streets to reach 4%. They stand at 4.4% in the shopping centres segment. Concerns about vacancy rates, lower footfall and activity and decline in rental perspectives negatively impact yields. Conversely, prime yields are staying stable in the out of town retail at 5.25%. Assets with food retailers also record an increased interest form the different investors.

OUTLOOK: The retail landscape will continue its reshaping in 2021.

The COVID-19 crisis accelerate 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 omni-channel strategies. Physical retail s however set to survive though in a different format.

Out-of-town 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 traders, in particular thanks to the increased storage possibilities. Meanwhile, the shopping centre format will continue to evolve towards greater integration with the Food & Beverage and leisure segment. 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 and retailers must therefore be created to develop a genuine renewal of the country's commercial neighbourhood, which will be beneficial for the revival of urban life.

Prime rents are expected to remain stable in 2021 to start increasing again in 2022 and 2023. Conversely, prime yields are foreseen to experience further slight increase in 2021 as a result of a greater investors’ cautiousness.

MARKET STATISTICS Q4 2020 SUBMARKET

PRIME RENT (EUR/SQ M/YEAR)

PRIME YIELD (%)

HIGH STREET

1,600

4.00%

160

5.25%

1,150

4.40%

OUT OF TOWN RETAIL SHOPPING CENTRE

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.