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Dutch Retail Market Bulletin - 2009

2009: A year with


opportunities in the retail
market
The economic decline is slowing down, while consumer and
investor optimism has improved. The financial markets are also
showing the first modest signs of improvement.

The economic recession has mainly an effect on secondary retail


locations. Prime rents for retail units on prime shopping locations
remain relatively stable because of a constant demand from
financial strong retailers.

As the year progresses, the expectations of suppliers and


investors will increasingly converge. The market is moving
towards fair values, while initial yields will stabilize by the end of
2009.
2 On Point • Dutch Retail Market Bulletin • 2009

Foreword
You have before you the second edition of the Dutch Retail Market Bulletin. In this edition, we pay special attention to the economic situation
in the Netherlands and its effects on the retail property market. Both retailers, investors and developers face the challenge of surviving the
credit crisis. The prime shopping areas are expected to weather the credit crisis reasonably well. The question is, however, how the
secondary locations will develop in the various cities. In order to provide insight into the developments in the retail property market, we will
analyse the connection between expected economic development and future demand for retail property. Not only will we consider the
negative effects of the recession and the financial crisis, but also we address opportunities which we anticipate the market will present for
retailers, investors and developers in the coming months.

Against the backdrop of the economic situation, the Dutch retail market is undergoing structural changes. Internet sales are on the increase.
Specialisation and branding are now crucial factors for small and medium-sized cities in coping with the ever-growing competition from the
large cities. Sustainability is becoming increasingly important for retailers, investors and developers. This bulletin will tell you about the
consequences for the retail property market and the opportunities arising in 2009 and in the long term.

This bulletin covers the following subjects:

• The economic situation and its effects on the Dutch retail property market.
• The principal trends, developments and the outlook for the retail occupier market.
• Development of retail property values in the investor market.
• Five arguments as to why 2009 is a year with opportunities in the Dutch retail market.

The Dutch Retail Market Bulletin is a quantitative addition to our Retail Market Special, which is published annually. This bulletin contains the
most important facts and figures with regards to the Dutch retail property market, together with an outlook for the sector. We know for a fact
that the demand for retail property is undergoing major changes. Therefore we are closely monitoring the market and the manner in which
retailers, government bodies, project developers and investors are dealing with these changes. If you as an investor or retailer are interested
in the Dutch retail market, this report gives you all the information you need in order to have a good picture of the retail property market.
Before entering the market, it is important to realise that the Dutch retail market is substantially different from other European retail markets.
It is characterised by the intricate retail structure, the strong protection of inner cities and the absence of mega malls. If you are already
familiar with the Dutch retail market, this report gives you a clear overview of the latest developments and the principal expectations. This
may help you when taking decisions in respect of retail property and making the most of your opportunities.

Richard Dallinga Ruben Langbroek


National Director Retail Head of Research
On Point • Dutch Retail Market Bulletin • 2009 3

Dutch economy
The economic decline seems to be slowing down, despite the Developments in the retail industry
disappointing results which Statistics Netherlands (CBS) presented In 2008, total retail turnover in the Netherlands increased by 2.5% to
in May. Consumer and investor optimism has improved, and the € 88.0 billion. The turnover forecast for 2009 is € 87.1 billion.
global financial markets are showing signs of recovery as well.
Jean-Claude Trichet, the President of the European Central Bank, • The food sector experienced strong growth in turnover in the
observed: “The sentiment is that in terms of growth we have second half of 2008, partly because of the fall in spending in the
reached a turning point in the cycle.” The second half of 2009 will be catering industry.
marked by stabilization. The economy is expected to see a modest • Spending in the non-food sector fell sharply. In particular, there
growth during 2010. was a strong decline in sales of luxury items, DIY articles, fashion,
furniture, and consumer electronics.
Figure 1: Economic development in the Netherlands ‘04 – ‘12 • The number of bankruptcy petitions filed by retailers rose from
% YoY 281 in Q1 2008 to 482 in Q1 2009 (source: CBS).
8
Forecasted growth • The amount of retail spending online continues to increase to the
6
4 detriment of spending on the physical high street. Online retail
2 turnover is expected to reach approximately € 4.7 billion by 2012
0 with 8.5% of all non-food spending taking place online.
-2
-4
-6 Figure 3: Development of retail sector 2006 – Q1 2009
-8 % YoY
2004 2005 2006 2007 2008 2009 2010 2011 2012 15
Provisional
Economic Growth Growth Retail Sales figures CBS
10
Source: Global Insight (2009)
5

The decline in retail turnover also seems to be slowing down. 0

However, although the strongest decline has passed, retail turnover -5


will not stabalize until 2010. Owing to bankruptcies and current
-10
restructuring in the business sector, unemployment will continue to
rise and will reach 8.5% in 2010 (source: CPB). As consumers -15
2006 2007 2008 2009
remain uncertain, they are cautious in their spending. For many Food Consumer Electronics
retailers it remains a financial hard period. Household Goods Books & Newspapers
Sustainable and DIY-Goods Clothing & Footwear
Source: CBS (2009)
Figure 2: Development of retail sales 1996 – Q2 2009
% YoY %
Size of retail property market
6 40

30
The Netherlands is one of the most mature retail property markets in
4
20 Europe. Together with Sweden, the Netherlands has the highest
2 density of retail floor space in Europe.
10

0 0
Q1 1996
Q1 1997
Q1 1998
Q1 1999
Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009

-10 Characteristics of Dutch retail property market


-2
-20 Number of retail areas: 2,527
-4
-30 Total retail stock: 26.71 million m2 lfa
-6 -40 Average space per 1,000 inhabitants: 1,629 m2 lfa
Growth Retail Sales Consumer Confidence Willingness to Buy Number of retail outlets: 104,800
Source: CBS (2009), Global Insight (2009) Source: Locatus (2009)
4 On Point • Dutch Retail Market Bulletin • 2009

Occupier market
The economic downturn has had a strong impact on retailers’ Table 2: Top 10 shopping cities in the Netherlands
demand for property. However, prime locations such as the A1
City Inhabitants m2 lfa Sales m2 lfa per
shopping areas are still popular, especially with international
(Jan ’09) outlets inhabitant
retailers and financial strong retailers wanting to take advantage of
Amsterdam 756,300 970,900 6,210 1.3
newly-available retail space by expanding or relocating.
Maastricht 122,100 226,000 1,120 1.9
Utrecht 294,700 468,100 1,890 1.6
Table 1: Retailer demand in the Netherlands
Rotterdam 587,200 842,600 4,140 1.4
Retail units Shopping centres Retail WH parks Eindhoven 212,300 379,500 1,380 1.8
Primary The Hague 475,900 636,400 3,640 1.3
Secondary Arnhem 145,600 282,000 1,080 1.9
Low High Groningen 182,700 399,800 1,310 2.2
Den Bosch 137,800 252,800 1,070 1.8
Rental growth Amstelveen 79,900 114,300 420 1.4
Despite a fall in retail turnover, prime rents remained stable during Source: CBS (2009), Locatus (2009)
last six months. The amounts paid for key monies have fallen,
however. As well as a moderate economic growth, a limited Figure 5: Prime rental growth for retail units four largest cities
increase in prime rents is also expected during 2010 and onwards. % YoY
25
Forecasted rental growth
20
• The highest prime rent is € 2,265 per m2 lfa per annum, which is
15
paid for a retail unit in Kalverstraat in Amsterdam.
10
• Prime rents in the Netherlands are expected to go up by 0.8%
between now and the end of 2011. The Netherlands will be 5

performing relatively well compared to other European countries. 0

• Rents on secondary locations have gone down because of the fall -5


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
in retailer demand.
Amsterdam The Hague Rotterdam Utrecht
• The prime rent for systematically developed shopping centres is
Source: Jones Lang LaSalle (2009)
€ 1,155 per m2 lfa per annum and has remained stable.
• The prime rent in retail warehousing parks has fallen and is now Figure 6: Current prime rents for retail units in Europe and
€ 130 per m2 lfa per annum. Key monies are rarely paid. expected rental growth for 2009 - 2011
• Rental growth on prime locations in small and medium-sized cities Rents per sqm lfa per annum
4.0% < -1.9% - -0.1%
will remain stable or decline in the long term, because they do not
2.0% - 3.9% -2.0% - -3.9%
stand out sufficiently from competing shopping areas. 0.1% - 1.9% < -4.0%
0%
Stockholm € 1,230
Figure 4: Prime rent for retail units Q1 2009
Dublin € 4,455 Moscow € 2,900
Amsterdam € 2,265
Amsterdam € 2,265
Maastricht € 1,650 London € 6,440 Berlin € 2,640
Warsaw € 1,020
Brussels € 1,600
Utrecht € 1,600 Prague € 1,800
Paris € 7,500 Frankfurt
c
Rotterdam € 1,550 € 3,240
Budapest € 1,800
Eindhoven € 1,380
per m2 Barcelona € 2,545 Milan € 6,800
The Hague € 1,300 lfa pa
Madrid € 2,640
Rome € 6,500
€0 € 500 € 1,000 € 1,500 € 2,000 € 2,500

Source: Jones Lang LaSalle (2009) Source: Jones Lang LaSalle (2009)
On Point • Dutch Retail Market Bulletin • 2009 5

Figure 7: European shopping centre development 2009 - 2010 Figure 8: % of international retailer movements 2007 - 2008

BG International Origin
Fast growing

RO 9 Southern Europe
markets

TR
UA SK LU Relative retail Central & Eastern Europe
market size Western Europe
% increase in stock 2009 - 2010

6
RU 1
Transformation rate

Restricted markets Growth markets

4
GR LT
IT
PL 16 27
PT
BE HU CZ 3
LV 4
Low growth /

ES
DE IE NL 0
FI
Total GLA in
FR UK SE m2 / 1,000
6
EE inhabitants
17
Up coming shopping Underdeveloped Developed Shopping Centre Market
centre stock SC market Focus on extensions and redevelopment 7
Market maturity

Source: Jones Lang LaSalle (2009) Source: Jones Lang LaSalle (2009)

New schemes and redevelopment Table 4: Retailers expected - Dutch prime locations
Retail stock is scheduled to increase by 4% by the end of 2010,
ranging from new retail warehousing parks to extensions of prime Formula Type Country of origin
shopping areas that are being redeveloped. The planned increase in Primark Fashion Ireland
systematic shopping centre stock is even 6% between now and the G-Star Fashion Netherlands
end of 2010. Although planning permission has been obtained and New Look Fashion United Kingdom
designs are ready for various projects, a highly considerable number Zadig et Voltaire Fashion France
of these projects will probably not go ahead. Developers are Burberry Fashion United Kingdom
experiencing too much difficulty in gaining financial backing, while
Table 5: Retail trends
some developers even have difficulties to not go bankrupt.
Long-term developments on the supply side
Emerging retailers • The first ‘green’ retail developments have been launched in
The deterioration in trading conditions has provided financially Europe. The Netherlands is lagging behind for the moment.
strong retailers with opportunities to enter new markets and increase Sustainable retail property is mainly a redevelopment issue.
their market share at favourable lease conditions. Retailers prefer • Retailers increasingly present themselves as a ‘lifestyle’. Due
franchising in order to reduce the risk. The internationalisation of the to its success, as well as increases in scale, department stores
high street is continuing, which is especially beneficial for the prime are no longer the only anchor tenants in shopping areas.
retail locations because it strengthens their competitive position. • ‘Lifestyle’ and ‘branding’ of a shopping area are becoming
This trend is visible throughout Europe. Between 2007 and 2008, increasingly important tools in capitalising fully on consumer
Jones Lang LaSalle tracked more than 500 occurrences of interests and behaviour.
European retailers entering a new foreign market (Figure 8).

Long-term developments on the demand side


Table 3: Expanding retailers - Dutch prime locations
• Demand for sustainable retail property will increase in one or
Formula Number of shops Expansion period two years’ time. An increasing number of large retailers are
Mooi 21 2 years drawing up a CSR policy with sustainability targets.
De Tuinen 6 6 months • The boom in online retail will continue. International retailers
G-Star 4 6 months are exploring the online expansion opportunities.
Rituals 12 2 years • The number of Dutch people shopping on Sundays is rising.
Apple 10 2 years This need will continue to increase in the years to come.
6 On Point • Dutch Retail Market Bulletin • 2009

Investment market
Investors are maintaining a wait-and-see attitude in acquiring retail Figure 11: Total Returns - Retail
property, anticipating that prices will fall further. Higher costs and %
16
limited availability of finance are also restricting market liquidity, 14
especially for large transactions. This is happening throughout 12
10
Europe. As the year progresses, the expectations of suppliers and 8
investors will increasingly converge. The market is moving towards 6
4
fair values, which will prompt new investment transactions. The 2
implementation of write-downs and a limited return of liquidity to the 0
-2
financial market are two major incentives. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Income Return Capital Growth Total Return
Figure 9: Investment volume per retail type 2004 – Q1 2009 Source: ROZ / IPD Nederlandse Vastgoedindex (2009)
€ bln.
3.0
The prime net initial yields for retail property remained stable in Q1
2.5
Long-term 2009. Because of the small number of transactions, there is little
2.0 average
hard evidence of a decrease in value. The number of transactions is
1.5
expected to rise lightly as the year progresses. This will create an
1.0
upward pressure on initial yields. The increase in the prime net initial
0.5 yields is expected to stabilise towards the end of 2009.
0.0
2004 2005 2006 2007 2008 Q1 2009
The total return on retail property fell sharply to 5.5% in 2008. At
Unit Shops Shopping Centre Retail WH Parks
Source: Jones Lang LaSalle (2009) 6.0%, the income return remained reasonably stable. The decrease
in value was caused primarily by a substantial fall in the capital
The total investment volume in retail in 2008 was € 1.72 billion, growth from 6.8% in 2007 to –0.5% in 2008.
which was nearly equal to the long-term average. In Q1 2008, the
volume already amounted to € 1.06 billion, partly because of the Table 6: Investment trends
sale of the Unibail-Rodamco portfolio. The number of transactions
Short-term and long-term developments
declined from the second half of 2008. The investment volume in Q1
• Institutional investors and private investors are more cautious
2009 was € 200 million. This means that the Netherlands did
about buying retail properties and portfolios.
relatively well compared to other European countries.
• Investors with sufficient equity will benefit the most from buying
retail properties.
Figure 10: Prime net initial yields 2004 - 2013
• The demand remains for retail property with a low risk and
9%
8% long-term security. This concerns mainly high-quality property
7% in prime locations with large numbers of passers-by.
6%
5%
• Sustainability is becoming increasingly important for large
4% investors. When sustainability becomes common use, a
3%
Forecasted growth sustainable development will help slow down the process of
2% prime net yields
1% economic and functional obsolescence of a retail property or a
0% retail complex. This will have a positive effect on value
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unit Shops Office Warehouse
development.
Source: Jones Lang LaSalle (2009)
On Point • Dutch Retail Market Bulletin • 2009 7

Retail Market outlook


The economy is at a turning point in the cycle, although the forecast Against the backdrop of the economic situation, a number of long-
remains moderate. Investor and consumer optimism has improved. term developments are in progress which will structurally change the
The global financial markets are showing signs of improvement as Dutch retail market and have an impact on rents and yields:
well. The second half of 2009 will be marked by stabilization. During
2010, the economy will return to a modest growth. However, • The competitive position of shopping areas in large cities is
consumers remain uncertain because of rising unemployment. improving. Small and medium-sized cities must focus better on
Although the strongest decline has passed, retail turnover will not consumer lifestyles and needs. Branding and specialisation are
stabilize until 2010. essential.
• Online sales continue to rise, resulting among other things in a
There has been a sharp decline in retailers’ demand for retail space. decline in spending in physical shops on the high street.
Various non-food retailers endure a difficult period due to declining • Sustainability is becoming increasingly important. Medium-term
turnovers. Secondary locations are hit mostly by the current opportunities especially concern sustainable retail space at prime
recession. However, prime locations such as the A1 shopping areas locations with sufficient passers-by.
are still popular. Financially strong international retailers see
opportunities to enter new markets, partly by franchising. Some Why is 2009 a year with opportunities in the retail market?
retailers see opportunities to move to better locations or to expand Although the economy will not pick up during 2010, there are
in the prime shopping areas, because other retailers consider it already various opportunities for retailers and investors in 2009:
necessary to move. Prime rents will increase slightly again during
2010. Rental growth is expected to be approximately 0.8% between • Interesting properties will come on the market. Investors will focus
2009 and the end of 2011. even more on their principal assets and will remove single retail
units from their portfolios. This creates a movement in sales
Suppliers and investors will gradually draw closer together in 2009. prices. In addition, a number of suppliers are being forced by
Because of the continuing scarcity of credit in the financial markets circumstances to lower their prices.
and because of property write-downs, the market will move towards • The prime initial yields will stabilise by the end of 2009. That will
fair values. The initial yields will increase as more transactions are be the perfect moment to become involved and make the most of
carried out. The increase in the prime net initial yields is expected to retail properties currently offered in attractive locations with a low
stabilise towards the end of 2009. Investor demand will focus risk profile that are expected to increase in value.
especially on retail property in prime locations with a low risk profile • Because some retailers are forced to move, new retail units will
and long-term leases. be available in prime locations. Retailers have become more
critical of the yield generated by a retail unit. Locations that do not
perform well enough will be disposed of, thus creating
opportunities for other retailers that want to extend their market
share, move to a better location or enter new markets.
• Retailers can conclude leases at a market-based rent. The level
of competition among retailers at a prime location is relatively low
at present, the rents at prime locations are stable and key monies
are either very small or not requested at all.
• The arrival of international retailers strengthens a shopping area’s
competitive position. This will help boost consumer numbers.
Jones Lang LaSalle Contacts

Richard Dallinga Ruben Langbroek


National Director Retail Head of Research
Jones Lang LaSalle Jones Lang LaSalle
Amsterdam Amsterdam
+31 (0)20 5 405 405 +31 (0)20 5 405 405
richard.dallinga@eu.jll.com ruben.langbroek@eu.jll.com

Ingrid Ploegmakers Tjard Martinus


Associate Director Retail Strategic Advisory
Jones Lang LaSalle Jones Lang LaSalle
Amsterdam Amsterdam
+31 (0)20 5 405 405 +31 (0)20 5 405 405
ingrid.ploegmakers@eu.jll.com tjard.martinus@eu.jll.com

Dutch Retail Market Bulletin – 2009

OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised
surveys and forecasts that uncover emerging trends.

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