Ups and downs in the retail sector

Tim Harrup

Real estate advisor Cushman & Wakefield, traditionally an expert in the retail sector, has produced a report on the state of the Belgian retail market after two quarters of this year. C&W starts by saying that take-up in the second quarter totaled 100,000 m, which is, 15% below the same period in earlier years, although perfectly in line with 2022. Nevertheless, when looking at the number of deals, this is found to be above 400 letting transactions since the start of the year thanks to a very second quarter. This is 10% more than the average over recent years.

Out-of-Town retail, C&W goes on, has suffered the most since the start of the year. When comparing the take-up and number of deals with previous years, it is immediately seen that the deceleration in take-up is mainly attributable to a downward movement of the activity in this segment. Following successive rises and historically high levels of take-up, activity is on the downside for the first time since many years, partially due to a temporary effect on the home and furniture sector. Conversely, activity in the High Streets is steady, with a similar take-up level (around 50,000 m) and more than 210 deals observed (+ 35 compared to the first half of 2022). As a result, transactions in this segment represent 53% of the total. Food & Beverage operators such as Hawaiian Pok Bowl are still on an expansion course while fashion brands continue their portfolio optimisation in Belgium. After a strong 2022, with 21,000 m of take-up in the first half of 2023, activity in Shopping Centres is 24% lower than in the first half of 2022. However, where the number of deals is concerned, the opposite is observed as more than 60 deals have been recorded so far this year (compared to 54 last year). Activity is relatively important in the Health & Beauty segment as well as in Food & Beverage.

All of this comes within a context where retail sales volumes are below 2022 levels. As the Belgian economy is relatively cloudy, C&W states, and consumers are facing difficult times with high inflation, a persistent softness in retail sales has been observed since the start of 2023. The Belgian retail sector has recorded levels globally 10% below last year. Food, beverages and tobacco record the most important decreases, followed by household equipment.

Where rental levels are concerned, C&W reports that prime rental values are on the rise in every market segment. Prime rental levels recorded positive movements in the second quarter in every market segment as a reaction to high inflation. Prime rents for the High Streets segment now stand at 1,650/m/year in the Meir (Antwerp) and at 1,600/m/year in Brussels. According C&W forecasts, prime rental levels are set to rise gradually to reach 725/m/year in 2026. In the Shopping Centre segment, prime rents are at 1,400/m/year. They should rise again as from 2025. Prime rents in Out-of-Town Retail increased to 180/m/year and are expected to 185/m/year in 2025.