BELGIUM / Retail Q4 2023
Diminishing inflation and a first neutral consumer confidence since over a year YoY Chg
12-Mo. Forecast
419,000 sq m Take-up (2023)
YoY Chg
12-Mo. Forecast
1,700 €/sq m/y.
While the forecasts for the last quarter still anticipated GDP growth of less than 1% and persistent inflation exceeding 4%, the situation appears to be improving, with a decrease in inflation allowing for an upward revision of GDP growth in the last quarter of the year, resulting in an annual growth of 1.48%. However, some trends persist and are expected to impact the Belgian economy in the coming months. The Belgian economy is expected to gradually expand, with a projected GDP growth of approximately 1.6% in 2024 and exceeding 1.8% in 2025. However, there is a higher-than-anticipated public debt deficit in Belgium. While high inflation allowed for a reduction of the government debt ratio in 2022, at unchanged policy, government debt would increase over the next decade, reaching about 120% of GDP by 2030 23. Inflation now stands at around 3%, far from the 10.6% recorded in October 2022, indicating that inflation has ultimately been only transitory. However, the possibility of an inflation resurgence remains a concern. Moreover, underlying inflation, which excludes volatile prices of food and energy, still persists. So, yes, central bank interest rates are expected to decrease in 2024, but perhaps more slowly than anticipated by financial markets, as structural inflation is expected to persist.
Prime rent High Street (Q4 2023)
YoY Chg
12-Mo. Forecast
609 MEUR Invested volumes (2023)
Economic Indicators Q4 2023 YoY Chg
12-Mo. Forecast
1.48% 2023 GDP Growth
5.61% 2023 Unemployment rate
3.97% 2023 Consumer Price Index
Meanwhile, in 2023, despite challenging economic conditions, the unemployment rate remained below 6%, but it is projected to sharply rise to 7% by the end of 2024, a level expected to persist for the next three years. The substantial increase in bankruptcies this year, coupled with a decline in employment linked to more stringent financing conditions and an unpredictable economic environment, is expected to account for the upward trend in the unemployment rate in the upcoming years.
It has been over a year and half that the consumers confidence has been negative. In December 2023, the consumers confidence increase towards 0, reflecting a neutral and non-pessimistic view by consumers since Russia invaded Ukraine in February 2022.
GDP Growth and Inflation 10%
10
8%
5
6%
0
4%
-5
2%
-10
Please note the economic data can vary significantly from one source to the other. Therefore, the figures provided should merely be used as an indication or trend.
-15
0% -2%
Sources: Moody’s Analytics, BNB, Eurostat, Federal Planning Bureau, September 2023
Consumers confidence index
2018
2019
2020
2021
2022
2023
2024
2025
2026
-20
-4%
-25
-6%
-30 GDP Growth
Inflation
BELGIUM / Retail Q4 2023
Resilient Growth in Retail Letting Market Fueled By Newcomers
Take-up by quarter (000s sq m)
In the final quarter of 2023, over 180,000 sq m has been recorded on the retail letting market. The latter totals the take-up at 419,000 sq m for 2023, which is in line with pre-COVID-19 levels. Although the year started of slow, the retail market has been able to keep up with previous years.
600
A total of 881 transactions were recorded, aligning with pre-COVID-19 levels. Among these, 443 (50%) took place in High Street properties, highlighting elevated activity levels, while 260 transactions occurred in Out-of-Town properties and 178 in Shopping Centres. Despite a lower transaction count, the Out-of-Town segment surpassed others with a size of 230,000 sq m, representing over 50% of the total take-up.
300
Among the three market segments, only Out-of-Town segment faced a challenging climate, while High Streets and Shopping Centers experienced robust take-up levels with 128,000 sq m and 63,000 sq m, respectively. The increasing interest in High Street locations contributes to the market's sustained performance. Moreover, occupiers persist in seeking spaces within city centers, particularly in tourist zones.
500 400
200 100 0 2018
2019
2020 Q1 Q2
2021 Q3 Q4
2022
2023
Distribution of the deals by segment Food & Beverage
Resilient Growth in Retail Letting Market Fueled By Newcomers The retail letting market has demonstrated strong performance, driven by the success of Food & Beverage, Clothing, and Health & Beauty retailers. These specific retail categories have asserted dominance across all three market segments. For instance, Hawaiian Poke Bowl expanded with 10 new branches, Albert Heijn opened 8 branches, and Medi-Market inaugurated 14 shops, and the clothing brands Only and Only&Sons opened 12 stores. Moreover, Naumy has recently ventured into the Belgian market with the opening of three new locations. These developments affirm the shift in consumer behavior towards investing in experiences and quality time spent with others.
Clothing Health & Beauty Home, Deco & DIY Services Food Retailer
Discounter Sports & Leisure Jewelry 0
20
40
60
80
100
120
140
Prime rent by sector (EUR/sq m/year)
Slight increase of the prime rents in High streets and Out-of-Town Prime rental levels have increased in the fourth and final quarter of 2023. In the High Streets segment, prime rents rose from 1,650 EUR/sq m/year to 1,700 EUR/sq m/year on the Meir and from 1,600 EUR to 1,650 EUR in Rue Neuve in Brussels. From 2024 on, stabilization is expected. In the Shopping Centre segment, prime rents stand at 1,400 EUR/sq m/year following an in-depth revision of our figures. They are projected to remain stable until 2026. Prime rents in Out-of-Town Retail were initially projected to rise to 185 EUR starting in 2025. However, in the final quarter, a revision of the figures revealed an increase from 180 EUR to 185 EUR. As of now, no additional increases are expected.
2.250 2.000 1.750 1.500 1.250 1.000 750 500 250 0
250
230 210
190 170
150 130 2018
2019
High Street
2020
2021
2022
2023
Shopping Centre
Note: OOTR Prime rents are to read on the right-hand axis
2024
2025
2026
Out-of-Town Retail
BELGIUM / Retail Q4 2023
Stable Interest Rates and Prime Yields in Retail Investment Market
Prime yields by market segment
The last interest rate increase from the European Central Bank dates back from the third quarter in 2023. Since the month of September, the interest rate has stood at 4.50% and has not witnessed any hike or drop.
7%
There was no additional growth in prime yields during the fourth quarter of 2023. The current prime yield for High Street is 4.85%, up from 4.70% in 2022 (+15bps). The Shopping Center prime yield ranges between 5.00% and 5.25% (without market evidence), while the Out-of-Town segment's yield increased from 5.80% in 2022 to 6.00%.
3%
6% 5% 4% 2% 1% 0% -1% 2018
While the Global Financial Crisis in 2008 saw substantial increases of +75bps and +90bps in prime yields, the current climate exhibits more moderate growth, ranging between +15bps and +20bps. Despite the challenging conditions observed in 2023, the retail investment market has demonstrated resilience, contributing to the slower pace of prime yield growth.
2019
2020
2021
2022
2023
Out-of-Town Shopping Centre
2024
2025
2026
High Street 10y. Bond Yields
Invested volumes by market segment (MEUR)
Strong Resilience with 272 MEUR in Q4
2.500
272 MEUR was recorded in the fourth quarter of 2023, which represents nearly 45% of the total annual invested volumes. The resilience of the retail investment market in 2023 is evident, despite facing challenging conditions.
2.000
The market recorded 609 MEUR in retail investments for the year, a decrease from 695 MEUR in 2022, reflecting a reduction of just over 10%. However, when looking at the five-year average, the 2023 investment volumes still indicate a decline of 30%. While a prudent attitude and a waitand-see approach have lessened, they are still present. Investors have shown interest in deals at 5 MEUR and lower, with 76 out of the 93 deals recorded in 2023 falling within this range, indicating a strong appetite for bread-and-butter transactions In the High Street segment, 24 deals were recorded, totaling 58 MEUR in the fourth quarter of 2023. This brings the yearly total to 63 recorded deals and an investment of 151 MEUR in 2023. Notable transactions for the year include the sale of Place de la Monnaie 4 in Brussels for 5 MEUR and the sale of De Box in Overpoortstraat, Ghent, for 7.5 MEUR. Shopping Centers recorded one value-add deal. The purchase of the 16,700 sq m Grand Bazar Shopping Centre in Antwerp by IRET Development Antwerp for 50 MEUR was the only deal recorded. The Out-of-Town segment has set an example, accounting for 409 MEUR of the total 609 MEUR recorded in 2023. One of the most notable deals of the year occurred in the final quarter—the sale of the 77,500 sq m Mitiska Portfolio for 194 MEUR, contributing to a quarterly investment volume of approximately 215 MEUR.
140 120
100 1.500
80
1.000
60 40
500
20
0
0 2018
2019 2020 Out-of-Town Shopping Centre
2021
2022 2023 High Street # of deals (RHS)
Oscar DE GROOTE Research Analyst | Belgium & Luxembourg +32 478 05 38 71 oscar.degroote@cushwake.com Benjam in DEVIE Research Analyst | Belgium & Luxembourg +32 492 11 35 10 benjamin.devie@cushw ake.com Jean BAHEUX International Partner | Head of Retail Agency +32 478 96 08 61 jean.baheux@cushwake.com Victoria TANRET Partner | Head of Capital Markets Retail +32 491 34 77 33 victoria.tanret@cushwake.com
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