Belgium Retail MarketView

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1 Belgium Retail MarketView CBRE Research 2012 GDP -0.2% 2013 GDP +0.6% UNEMPLOYMENT 7.2% RETAIL SALES +0.28% INFLATION +2.6% CONSUMER CONFIDENCE RETAILERS CONTINUE TO EXPAND OUT-OF-TOWN DESPITE FALLING CONSUMER CONFIDENCE Quick Stats Take up 214,406 m² Prime rent 1,850 m²/y Prime yield 4.25 % Quick Links Retail sales volumes stagnant Consumer confidence down International invasion of retailers ground to a halt Albert Heijn is the most expansive brand Multiple out-of-town schemes coming online Limited shopping centre development Flight to quality Limited shopping centre development Popularity of retail pushes yields further down The Belgian retail market has shrugged off gloomy economic forecasts and worries over the Eurozone crisis to record flat trading numbers year-to-date. Retailer expansion continues in 2012, with take-up after Q3 totalling 214,406 m² year-to-date. While letting transactions in both highstreets and shopping centers have slowed down, new out-of-town retail parks have been pulling in demand. Most development activity in 2012 and 2013 is focused on out-of-town retail, with numerous schemes being marketed or coming online. The future development pipeline of shopping centers is rather limited, at least until 2014 and possibly beyond. The leasing market continues to diverge, with rents stable or even trending slightly upwards in prime locations, while declining elsewhere, particularly in poorer secondary and tertiary locations. Albert Heijn is the most expansive brand Over 470 million have been invested in retail in Belgium in the first 9 months of Noteworthy, retail outperforms other property segments in Belgium in terms of liquidity or investment volume. The Belgian retail market might have reached an important pivot point in time. For now, retailers continue to expand and prime rents continue to rise. But the retail market in 2013 might depend on the sacrifices demanded from the Belgian consumers by the federal government.

2 THE ECONOMY CONSUMER CONFIDENCE DETERIORATES Chart 2: Retail sales volume growth 8% 6% 4% 2% 0% -2% -4% Retail sales (nominal) Retail sales (real) Chart 3: Consumer confidence & inflation Consumer confidence (left) Inflation (right) 8% 6% 4% 2% 0% -2% -4% RETAIL SALES VOLUME STRUGGLING TO KEEP UP WITH INFLATION The Belgian retail market has shrugged off gloomy economic forecasts and worries over the Eurozone crisis to record flat trading numbers year-to-date. Retail sales volumes stagnant Retail trade volume grew by 0.23% in the first 8 months of 2012, but is down by -1.85% in deflated terms. While fashion did reasonably well, both food and home & houshold stagnate in sales volume. debt problems cast doubt on the sustainability of the euro and the euro zone. Corporate layoffs Households are worried about unemployment and their financial health as fears over a general economic slowdown have come true. Recent layoffs at several large companies will likely keep consumer confidence down until at least the yearend. 2 A number of setbacks for the economy The fragile economic recovery that took place in Belgium and Europe over the last 2 years, encountered some significant setbacks over the summer months. A combination of the Eurocrisis, a further rise in oil prices and local fiscal pressure proved detrimental for economic activity in Belgium, resulting in negative GDP growth. Consumer confidence down After a brief period of relief and hope at the start of the year, consumer confidence quickly deteriorated again in the summer months, as souvereign More government savings ahead? The Belgian gouvernment has recently declared to search additional savings of 1 billion EUR in 2012 and some 4 billion EUR in This will likley increase fiscal pressure in One of the main strengths of the Belgian consumer has been the price-indexation of his salary. This indexation is an area of huge debate, as it increases labour costs for both companies and the government.

3 DEMAND RETAILER EXPANSION CONTINUES OUT-OF-TOWN Retailer expansion continues in 2012, with take-up after Q3 totalling 214,406 m² year-to-date. While letting transactions in both highstreets and shopping centers have slowed down, new out-oftown retail parks have been pulling in demand. International invasion of retailers ground to a halt The international invasion of retailers seems to have ground to a halt, with only few new entrants in Belgian fashion consumers have welcomed one new name, Italy s Calzedonia, which opened already 7 stores. Elsewhere, the French children s fashion company Orchestra acquired the domestic babycare retailer Prémaman, which has around 80 Belgian stores as well as extensive operations overseas. Most of the major Anglo-Saxon brands that have already arrived, such as Forever 21, Hollister and New Look, are not presently looking to expand their existing footprints. Primark is actively seeking new stores to join its sole Belgian outlet in Liège but has found suitable space difficult to come by. In the meantime, it has announced an expansion of the Liège store which will add a further 3,000 m² of trading space. The most active fashion brands have been the perennially dynamic H&M and Inditex Group, together with Hunkemöller, C&A and ZEB. Desigual and Marc O Polo each opened 2 new stores in A HEALTHY 214,406 M² OF RETAIL LETTINGS HAVE ALREADY BEEN SIGNED IN BELGIUM Chart 2: Take-up per quarter Chart 3: Take-up per segment 400,000 m² 350,000 m² 300,000 m² 250,000 m² 200,000 m² 150,000 m² 100,000 m² 50,000 m² 0 m² Q1 Q2 Q3 Q4 130,707 m² 52,456 m² 30,521 m² highstreets shopping centres retail warehousing 3

4 Chart 2: Most expansive retailers in 2012 (year-to-date) 7 stores 12,000 m² 6 stores 6,785 m² 6 stores 1,356 m² 5 stores 481 m² 6 stores 3,411 m² 4 stores 3,422 m² 4 stores 408 m² 4 stores 4,400 m² 4 stores 3,489 m² Albert Heijn is the most expansive brand The international brand making the most significant impact on the Belgian retail market today is, perhaps surprisingly, in the grocery sector. Albert Heijn, part of the Dutch Alhold Group, entered the market in 2011 with a focus on the Flemish-speaking territories. Despite the Belgian grocery sector being thought of as both mature and highly competitive the company has produced results that exceeded even its own expectations. It now has some six stores open with leases signed for a further 10 to 12. continue to make steady progress. Premium fashion brands suffer from the crisis There has been a notable squeeze among the upmarket fashion chains, which have seen sales cannibalised by mass-market labels like H&M and Zara. The Belgian upmarket women s fashion retailers Olivier Strelli and Luc Duchene have both folded. ALBERT HEIJN QUICKLY EXPANDS ACROSS FLANDERS 4 Among the domestic retailers the strong performers of recent years, including Lola & Liza and Veritas,

5 Chart 2: Notable transactions in 2012 Date Address m² Type Occupant 10/ Bruxelles, Rue St-Louis 200 (Woluwe Shopping Center) 300 m² Letting Pull & Bear 09/ Gent, Ottergemsesteenweg (Retailpark Dacar) 14,300 m² Letting Brico Plan-it 09/ Hasselt, Hoogstraat m² Letting Desigual 09/ Genk, Hasseltweg 196 3,512 m² Letting Gamma 08/ Roeselare, Brugsesteenweg 5,000 m² Letting Gamma 08/ Jumet, Avenue Jules Bastin 7 (Park Redevco Jumet) 1,943 m² Letting Trafic 08/ Couillet, Route de Philippeville 1,965 m² Letting Krëfel 08/ St-Katelijne-Waver, Mechelsesteenweg 4,700 m² Letting Metro 08/ Olen, Lammerdries (Shopping Park Olen I) 2,234 m² Letting Albert Heijn 08/ Roeselare, Brugsesteenweg 5,000 m² Letting Gamma 08/ St-Katelijne-Waver, Mechelsesteenweg 4,700 m² Letting Metro 07/ Mouscron, Boulevard des Alliés (Les Dauphins) 2,071 m² Letting H&M 07/ Mouscron, Boulevard des Alliés (Les Dauphins) 2,066 m² Letting Krëfel 07/ Mouscron, Boulevard des Alliés (Les Dauphins) 2,546 m² Letting Delhaize 06/ Maasmechelen, Maaslaan 4,300 m² Sale Decathlon 05/ Knokke, Kustlaan m² Letting Agent Provocateur 05/ Verviers, Garde de l'ouest (Crescend'Eau) 3,800 m² Letting Decathlon 04/ Antwerpen, Meir m² Letting Calzedonia 04/ Mechelen, Bruul 17 1,200 m² Letting Sac de Gand 03/ Ans, Rue des Lilas 2,470 m² Letting Colruyt 03/ Wilrijk, Boomsesteenweg 860 4,000 m² Letting Heeren 03/ Liège, Place St-Paul 1,200 m² Letting Jims 02/ Evergem, Noorwegenstraat 39 (De Nest) 5,300 m² Letting Metro Cash & Carry 01/ Antwerpen, Meir m² Letting Sportstaff 01/ Bruxelles, Boulevard Sylvain Dupuis 433 (Westland Shopping) 789 m² Letting JBC 01/ Deurne, Bisschoppenhoflaan 255 2,100 m² Letting Van Marcke 5

6 DEVELOPMENT MULTIPLE RETAIL PARKS BEING CONSTRUCTED T-Forum (Tongeren) 32,000 m² Most development activity in 2012 and 2013 is focused on out-of-town retail, with numerous schemes being marketed or coming online. Multiple out-of-town schemes coming online Notable schemes include Les Dauphins in Mouscron, the extension of the Portes de Charleroi Sud in Couillet and Crescend Eau in Verviers. The 32,000 m² retail park in Tongeren, Belgium s oldest town, opened its doors in August Thanks to competitive rental packages it leased very well, with units occupied by Hubo, Dreamland and Descarto among others. A number of new retail schemes are coming from Redevco. Redevco is in the process of restructuring some of its retail parks across the country, following the downsizing of the Carrefour network. Limited shopping centre development With no new shopping centre openings in 2012, the only notable addition of new space came with the 5,000 m² extension to the Shopping Nivelles scheme at Nivelles. The future development pipeline is rather limited, at least until 2014 and possibly beyond. New shopping center projects are plagued by delays as environment and construction permits are increasingly difficult to obtain. Also the commercialisation and financing of brand new retail projects proves to be diffult. uplace, the m² shopping center, recently received its environmental permit. The shopping center will start development in 2013, to open its doors in DEVELOPMENT ACTIVITY IS FOCUSED ON OUT-OF-TOWN RETAIL 6

7 Chart 2: New out-of-town retail schemes (2012/2013) Les Portes de Charleroi Sud (Couillet) 26,000 m² Cascade Shopping (Drogenbos) 29,000 m² Ring Shopping (Kortrijk) 9,000 m² V-Markt (Brugge) 11,000 m² Redevco Retail Park (Flémalle) 21,000 m² Crescend Eau (Verviers) 21,000 m² Brico Plan-it (Ghent) 12,000 m² 7

8 RENTS RENTAL VALUES DIVERGE Stad Antwerpen Meir (Antwerp) 1,850 per sq m/year 8 The leasing market continues to diverge, with rents stable or even trending slightly upwards in prime locations, while declining elsewhere, particularly in poorer secondary and tertiary locations. Flight to quality Demand for retail space at the prime end of the market, particularly towards the best highstreets and shopping centers, continues to propel rental growth in our largest cities. Both the Rue Neuve in Brussels and the Meir in Antwerp now trade at 1,850 per sq m/year for the best 200 m² retail units. Wijnegem and Woluwe both trade at 1,400 per sq m/year Many retailers are opting for prime retail space in an attempt to secure the best long-term prospects for their business in an uncertain market. This flight to quality even exists within prime zones, as variations can be recorded in trading/rental performance magnified to unit, not just street, level. The Meir, one of Antwerp s main shopping streets, is an example where certain units located in lower quality space are struggling to maintain current rent levels, often resulting in temporary occupation. The development shortage in terms of shopping centers gives room to existing schemes with good locations and proven track records, such as Waasland Shopping Center in the Flandrian region of Waasland and Belle Ile in Liège, to increase rents by anything up to 30% due to retailers willingness to pay a premium in order to preserve their positions. Out-of-town remains hugely popular Within the out-of-town sector, there has been a further power shift to the top quality parks that offer an attractive, well-conceived retail and leisure environment, while some of the older standalone parks are struggling. Rents in the top parks have remained broadly at the level of 175 per sq m/year, with the average for the sector a little below 100 per sq m/year. RENTS STABLE OR TRENDING UPWARDS IN PRIME LOCATIONS, WHILE DECLINING ELSEWHERE

9 BOTH THE RUE NEUVE IN BRUSSELS AND THE MEIR IN ANTWERP NOW TRADE AT 1,850 PER SQ M/YEAR FOR THE BEST UNITS Chart 2: Rents for highstreets (for 200 m² units) Street City Meir Antwerpen 1,700 euro/m² 1,750 euro/m² 1,850 euro/m² Steenstraat Brugge 1,100 euro/m² 1,150 euro/m² 1,150 euro/m² Rue Neuve/Nieuwstraat Brussels 1,600 euro/m² 1,700 euro/m² 1,850 euro/m² Goulet Louise/Louizalaan Brussels 1,250 euro/m² 1,300 euro/m² 1,350 euro/m² Rue de la Montagne Charleroi 600 euro/m² 550 euro/m² 500 euro/m² Veldstraat Gent 1,200 euro/m² 1,300 euro/m² 1,350 euro/m² Hoogstraat Hasselt 1,100 euro/m² 1,150 euro/m² 1,200 euro/m² Kustlaan Knokke 800 euro/m² 775 euro/m² 750 euro/m² Diestsestraat Leuven 800 euro/m² 850 euro/m² 900 euro/m² Vinave d'ïle Liège 1,000 euro/m² 1,000 euro/m² 1,100 euro/m² Rue de Fer Namur 1,000 euro/m² 900 euro/m² 900 euro/m² Chart 3: Rents for shopping centers (for 200 m² units) Shopping center City Wijnegem SC Antwerpen 1,300 euro/m² 1,350 euro/m² 1,400 euro/m² City2 Brussels 1,050 euro/m² 1,050 euro/m² 1,100 euro/m² Woluwe SC Brussels 1,250 euro/m² 1,325 euro/m² 1,400 euro/m² Belle Ile Liège 650 euro/m² 650 euro/m² 750 euro/m² L'Esplanade Louvain-la-Neuve 750 euro/m² 800 euro/m² 850 euro/m² Grands Pres Mons 700 euro/m² 750 euro/m² 800 euro/m² Waasland SC St-Niklaas 825 euro/m² 825 euro/m² 850 euro/m² Chart 3: Rent for out-of-town retail (for 2,000 m²) Location City Rue de Stalle Drogenbos 165 euro/m² 165 euro/m² 165 euro/m² Kortrijkse Steenweg Gent 150 euro/m² 150 euro/m² 150 euro/m² Bredabaan Merksem/Schoten 165 euro/m² 170 euro/m² 175 euro/m² Chaussée de Tongres Rocourt 130 euro/m² 130 euro/m² 130 euro/m² t Gouden Kruispunt Tielt-Winge 150 euro/m² 150 euro/m² 150 euro/m² Chaussée de Bruxelles Waterloo 150 euro/m² 150 euro/m² 150 euro/m² Boomsesteenweg Wilrijk 150 euro/m² 150 euro/m² 150 euro/m² Leuvensesteenweg Zaventem 145 euro/m² 150 euro/m² 155 euro/m² 9

10 INVESTMENT RETAIL REMAINS VERY POPULAR Over 470 million have been invested in retail in Belgium in the first 9 months of Noteworthy, retail outperforms other property segments in Belgium in terms of liquidity or investment volume. Small is beautiful Notable transactions include the sale of Les Grands Prés in Mons and the Toison d Or Gallery in Brussels. A noteworthy feature of the investment sector has been the sharp increase in the number of private investors buying retail real estate assets worth anything up to 3 million. These buyers typically see such assets as less risky than equities or placing money with banks and it has led to a real boom within this market niche. Popularity of retail pushes yields further down Further yield compression has been noted for all retail sectors. The best highstreet units trade at yields between 4 and 5%. Shopping centers are valued in between 5.5% and 6% today, while out-of-town retail is acquired at yields of 5.75% to 6%. 470 MILLION INVESTED IN RETAIL IN BELGIUM IN THE FIRST 9 MONTHS OF 2012 Chart 8: Investment volume (all properties in Belgium) 6.00 bio EUR 5.00 bio EUR 4.00 bio EUR 3.00 bio EUR 2.00 bio EUR 1.00 bio EUR 0.00 bio EUR Offices (Brussels) Offices (Regions) Industrial Retail Hotels & Leisure Elderly homes Residential Table 2: Investment volume for retail High Street Retail 292,725,830 euro 105,430,063 euro 70,481,061 euro 129,618,878 euro 112,520,469 euro Shopping Centers 110,940,000 euro 360,000,000 euro 23,000,000 euro 199,050,000 euro 225,250,000 euro Retail warehouses 320,930,541 euro 75,962,143 euro 138,660,000 euro 119,943,668 euro 136,310,000 euro Total 724,596,370 euro 541,392,206 euro 232,141,061 euro 448,612,546 euro 474,080,469 euro 10

11 CONTACTS For more information about this Retail MarketView, please contact: BELGIUM RESEARCH Kim Verdonck Head of Research t: e: kim.verdonck@cbre.com BELGIUM RETAIL Patrick Tacq Head of Retail t: e: patrick.tacq@cbre.com John Collin Head of Retail t: e: john.collin@cbre.com +FOLLOW US GOOGLE+ FACEBOOK TWITTER CBRE RESEARCH This report was prepared by the CBRE Belgium Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. DISCLAIMER CBRE s.a. confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. 11