The Belgian Retail Market - JLL · The Belgian Retail Market. 2 | pulse | BELGIAN RETAIL MARKET | APRIL 2014 *DEFLATED AND DESEASONALISED **LTM : LAST TWELVE MONTHS ... Brussels,

Pulse Spring 2014Quarterly Market Update

The Belgian Retail Market

2 | pulse | BELGIAN RETAIL MARKET | APRIL 2014 www.jll.be

*DEFLATED AND DESEASONALISED**LTM : LAST TWELVE MONTHS°YTD : YEAR-TO-DATE

Source all charts : JLL Research

The Belgian retail property market can be divided into 3 segments : high streets, shopping centres and retail warehousing. An overview of the volumes registered on both the occupier and investment markets is detailed further in this publication. The prime Belgian retail streets are the main shopping streets in the Big Six : Brussels, Antwerp, Bruges, Ghent, Liège and Hasselt. E-commerce is a growth market in Belgium, and shops are adapting their formats to the evolving retail landscape. Looking forward, new large shopping centre projects are foreseen for delivery from mid-decade onwards, whilst for the moment retail warehousing projects are dominating the development scene. Rental levels are stable in prime locations. Vacancy in prime shopping centres and high streets remains low.

Summary Statistics Q1 14Change 12 Month

outlookQ-o-Q Y-o-Y

CONSUMER CONFIDENCE (NBB/BNB) -8 -3 16

RETAIL SALES VOL. INDEX* - FEB2014 (EUROSTAT) 102.22 -19 bps 97 bps

TAKE-UP - CURRENT QTR (SQM) 47,315 -49% -1%

TAKE-UP - LTM** CUMULATIVE (SQM) 342,500 0% 13%

COMPLETIONS - YTD° CUMULATIVE (SQM) 35,826 -41% -66%

PRIME RENT € / SQ.M. PA 1,850 0% 0%

Investment Market >2.5MEUR Q1 14Change* 12 Month

outlookQ-o-Q Y-o-Y

PRIME YIELD % 4.00 -25 bps -25 bps

MARKET OVERVIEW


1 SOURCE NBB/BNB2 SOURCE EUROSTAT

According to figures from Oxford Economics, the Belgian GDP is expected to grow 1.1% in 2014, rising to 1.7% in 2017, so the Belgian economy will show only modest growth in the next few years. Industrial production and confidence among Belgian firms and households improved in the last 2 quarters, which are signs of recovery. The export market will benefit from the recovery of Eurozone trade, although the recovery will be modest due to weak confidence in major trading partners. As public debt remains high, public spending will continue to be restrained. Consumer spending is expected to grow 1.3% in 2014, on the basis of weak price pressures, indexed wages and household balance sheets that are strong in comparison with other European countries. Unemployment remains high, at 8.5% (February 2014), and is expected to rise slightly in the coming months, and probably stay above 8% for the next 2 years.

After climbing steadily throughout 2013, from -23 in January to -5 in December, the consumer confidence indicator of the National Bank of Belgium declined again in the first quarter of 2014. After remaining stable at -4 in January and February, the indicator registered a solid decrease to -8 in March, and further modest decline to -9 in April. The decline is based on deteriorated prospects relating to the economic situation, unemployment levels, people’s savings capacity and financial prospects. Confidence remains, nevertheless, 16 bps higher than one year ago.

BELGIAN CONSUMER CONFIDENCE INDICATOR1 VS. WHOLESALE AND RETAIL SALES VOLUME²

Consumer confidence declined in Q1

* Deflated and deseasonalised


CONSUMER CONFIDENCE

9596979899100101102103104105

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Consumer Confidence (LHS) Retail Sales * (RHS)

“ E-commerce is increasing and has a major impact on the off-line retail scene and the expansion strategy of both local retailers as international brands.ˮ

WALTER GOOSSENS, HEAD OF RETAIL AGENCY


In Q1 2014, take-up levels were 49% down on the previous quarter, but remained in line with the take-up level registered in the same quarter last year. The reverse was registered in number of transactions : they increased 22% in comparison with Q1 2013, from 114 to 140. With regard to market segments, retail warehousing registered the highest transaction volume, 25,800 sq.m. in 35 transactions, representing 55% of the quarterly volume. Shopping centres represented 17% of the take-up volume, 8,000 sq.m. in 35 transactions, whilst high streets represented 28% of take-up, 13,400 sq.m. in 70 transactions. Geographically, 60% of take-up was registered in the Flemish Region, 27% in the Walloon region, and the remaining 13% in Brussels Capital Region.

In Q1 2014, the 2 largest cities in Belgium, Brussels and Antwerp, registered the highest take-up volumes. Their combined take-up volume represented 18.2% of the take-up volume in the country, and 27% of the transaction number, good for 38 transactions out of 140. Gent follows in 3rd place, with 7 transactions totalling 1,445 sq.m. In Wallonia, the highest transaction volumes were registered in Mouscron, in Gosselies and in the Liège area.

The top 3 transactions in Q1 2014 all involved retail warehousing properties : Health City let 2,000 sq.m. in Seraing, Pretland signed for 1,900 sq.m. in the new park Les Dauphins in Mouscron, and Facq let 1,800 sq.m. in Halle, South of Brussels. In the high street segment, 3 large letting transactions were registered on the Avenue de la Toison d’Or in Brussels : & Other Stories (H&M Group) pre-let 950 sq.m. in the former STIB building project in No. 15, Boggi Milano let 663 sq.m. in No. 47, and Massimo Dutti extended its current area by 650 sq.m. in No. 22. Boggi Milano is a newcomer in Brussels.

LARGE TRANSACTIONS IN BRUSSELS HIGH STREETS

The take-up volume registered in high streets in Q1 2014 amounted to 13,400 sq.m. in 140 transactions, 29% below that of the same quarter last year. There were more, but less large transactions than one year earlier. The average size of transaction was 191 sq.m., against 308 sq.m. in Q1 2013. The largest proportion, equivalent to 6,900 sq.m. or 51%, was registered in 36 transactions in the prime high streets of the Big Six (Brussels, Antwerp, Ghent, Liège, Bruges and Hasselt). No less than 3 retailers signed for large shop units on the Avenue de la Toison d’Or in Brussels showing its increasing attractiveness, underpinned by the anticipated arrival of Apple and Marks & Spencer in the Prowinko project.

TAKE-UP BY SEGMENTSlow start in 2014

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2009 2010 2011 2012 2013 Q1 2014

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Shopping Centres High StreetRetail Warehousing 5-yr Ave

WALTER GOOSSENS, HEAD OF RETAIL AGENCY

“ Prime high street locations continue to attract international retailers and newcomers such as Uniqlo, Boggi and Primark.ˮ

TAKE-UP



In Q1 2014 Brussels took the major share of transactions in high streets, particularly in the uptown Louise area, confirming its prime status in Belgium. Brussels alone represented 28% of the take-up in high streets this quarter. Antwerp and Gent complete the top 3. There were also 3 transactions in the prime high streets of Liège. In Namur, French shoes retailer Minelli entered the Belgian market opening a 125 sq.m. shop on the Rue St-Jacques, next to the former church, where fashion retailer Scotch & Soda let 367 sq.m.

TAKE-UP


The Mall of Europe- BRUSSELS -

Brussels54%

Antwerp25%

Ghent14%

Liège5%

Hasselt1%

Bruges1%

TAKE-UP IN BELGIAN HIGH STREETS - Q1 2014Brussels and Antwerp in the lead

Architect : JP Viguier

LARGEST TRANSACTIONS BIG SIX HIGH STREETS – Q1 2014

Address Sq.m. Retailer

BRUSSELS, TOISON D’OR 14-15 950 & Other Stories

BRUSSELS, TOISON D’OR 47 663 Boggi Milano

BRUSSELS, TOISON D’OR 22 650 Massimo Dutti

GENT, VLAANDERENSTRAAT 68 370 Eye4Digits

NAMUR, RUE ST-JACQUES 367 Scotch & Soda

SHOPPING CENTRES : PLANS OF EUROPEA UNVEILED

In Q1 2014, a total take-up volume of 8,135 sq.m. was registered in shopping centres, in 35 transactions. The volume is 78% higher than in the same quarter last year, and the number of transactions is 13% higher. The highest number of transactions were registered in City 2 in Brussels, Den Tir in Antwerp and K in Kortrijk. This segment suffers from the lack of offer. Take-up in shopping centres would have been higher if more area had been available. In addition, 10 renegotiation transactions representing 1,500 sq.m. were registered this quarter in various shopping centres. Vacancy in shopping centres is low and is expected to remain so, with long waiting lists for a number of them. Looking at future offer, the construction works for Docks Bruxsel (49,000 sq.m.) are under way, and 35% of the GLA is pre-let. In addition, progress has been made on the Neo shopping centre project. The project will be developed in 2 phases, the first of which will be developed by a consortium formed by Unibail-Rodamco, Besix and CFE. Phase 1 was named Europea and will offer 70,000 sq.m. shopping area, together with residential area, offices, leisure and parkings. Opening is scheduled towards 2021. A third large shopping centre, Uplace, located in Machelen on the Brussels periphery is also scheduled towards the end of the decade.

LOWER DEAL SIZE IN RETAIL WAREHOUSING

In Q1 2014, a total take-up volume of 25,800 sq.m. was registered in the retail warehousing segment. That is 5% higher than in the same quarter last year, but remains 18% below the 5-year quarterly average take-up volume for the same quarter. The average size of transactions, 737 sq.m., was 38% below the 5-year quarterly average of 1,185 sq.m. In Q2 so far, the average size of transaction rose again to above 1,000 sq.m. In Q1, transactions were registered in Flanders and Wallonia, none in Brussels. This market segment benefits from the sustained interest of retailers, who are attracted by the availability of new or refurbished properties, lower rents in the segment, and good access and parking facilities. The largest transaction this quarter was the letting of 2,000 sq.m. by Health City in Seraing (Liège), the letting of 1,900 sq.m. by Pretland in Les Dauphins in Mouscron, and the letting by Facq of 1,800 sq.m. in Halle South of Brussels.


PROJECTS DELIVERED

Docks Bruxsel- BRUSSELS -

LARGE SHOPPING CENTRE PROJECTS ARE PROGRESSING

RETAIL WAREHOUSING DOMINATES PROJECT PIPELINE

In Q1 2014, 36,000 sq.m. were delivered in 7 projects, all retail warehousing. Schemes delivered in 2014 so far include D-Shopping in Deinze that was entirely pre-let (7,700 sq.m.) and Retail Park Bellefleur in Charleroi (15,000 sq.m.), also nearly entirely pre-let. A further 247,000 sq.m. are currently under construction, and will be delivered in the next 2 years. Total completions scheduled for 2014 are in line with the 5-year annual average of 175,000 sq.m. The success of retail warehousing schemes spread over the country and redevelopments of shopping centres such as Shopping 1 in Genk underpin the development pipeline.

With regard to the main shopping centre projects in Belgium, the most advanced is Docks Bruxsel, formerly named Just Under the Sky. The ground preparation works are nearing the end and the official launch of the construction works is imminent, with delivery planned end 2015/beginning 2016. Other main shopping centre projects include Uplace in Machelen on the Brussels periphery, and Europea, formerly named Neo, the redevelopment of the Heysel in Brussels. The City of Brussels has designed the consortium Unibail-Rodamco, Besix and CFE as developers. Delivery is forecast towards 2021.

PROJECTS

COMPLETIONS AND FUTURE SUPPLYShort-term dominated by retail warehousing

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With regard to Uplace, infrastructure works on the dedicated exit of the Brussels Ring Road were due to start in 2014. The start of the actual construction works is postponed and will depend on the outcome of a procedure with the Council of State. Large shopping centre projects outside Brussels include Rive Gauche in Charleroi (35,000 sq.m.) and Au fil de l’Eau in Verviers (29,000 sq.m.), both scheduled for delivery end 2016.

ART & BUILD

Europea - BRUSSELS -


RENTAL VALUES & INVESTMENT

PRIME RENTS STABLE IN PRIME LOCATIONS

Prime rents remained stable throughout the three market segments. In secondary locations, prime rents remain under downward pressure.

The rue Neuve and the Avenue Louise in Brussels and the Meir and the Schuttershofstraat in Antwerp are the prime retail high streets in Belgium. Prime rents for these 2 commercial axes remained stable at €1,850/sq.m./year., followed by the Veldstraat in Gent, where prime rents amount to €1,550/sq.m./year.

The Wijnegem shopping centre near Antwerp (57,500 sq.m.), currently the largest Belgian shopping centre, and the Woluwe Shopping Centre in Brussels (44,000 sq.m.) remain the prime shopping centres in Belgium showing the highest rents. Rents remained stable at €1,600/sq.m./year.

Prime retail warehousing rents on the Rue de Stalle in Drogenbos (Brussels periphery) remained stable at €175/sq.m./year, and are forecast to remain stable for the foreseeable future.

PRIME RENTSPrime rents remained stable

5,0

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4,04,55,05,56,06,57,0

Q42009

Q42010

Q42011

Q42012

Q42013

Q12014

Shopping Centre High Street Retail Warehousing

%

PRIME YIELDSRetail warehousing yields compress

“ Investors’ appetite for retail remains high throughout all categories and market segments.ˮ

JEAN-PHILIP VRONINKS, HEAD OF CAPITAL MARKETS


PRIME YIELDS FOR HIGH STREETS DOWN TO 4%

The prime yield for high streets improved 25 base points from 4.25 to 4.00%, due to a liquid market. Certain deals in prime locations were closed at yields under 4.00%. Yields for shopping centres and retail warehousing properties remained stable at 5.00% and 6.00% respectively. A total of € 63.93 mln was invested in retail properties in Belgium, for transactions from €2.5mln upwards. That is 49% below the volume invested in the same period last year, which was an excellent year. The largest transactions in the first quarter include the purchase by Bricorama of 6 properties throughout the country that were already occupied by the retailer, for € 16.8 mln, the purchase by REIT Retail Estates of 3 retail warehousing units let to DIY retailer Hubo for € 10.58 mln, and the purchase by a private investor of the Grand Optical shop on the Huidevettersstraat in Antwerpen for € 7.15 mln. Early in the second quarter, 4 transactions were registered, the largest of which was the purchase of 2 shops let to luxury retailers on the prime high street Boulevard de Waterloo for € 16 mln. After just one quarter, retail is the third asset class in Belgium after offices and industrial. Important transactions in the shopping centre segment are expected, in which event retail should remain the second asset class in 2014, after offices.

1.600

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Shopping Centres (LHS) High Street (LHS)Retail Warehousing (RHS)

High Streets

Shopping Centres

Retail Warehousing


LARGEST OCCUPIER MARKET TRANSACTIONS LAST 12 MONTHS

Transactions

Year Qtr City Address Type Sq.m. Retailer

2013 3 Awans Rue Defrêne 107 Pre-let 13,479 Walter Van Gastel

2013 3 Awans Rue Defrêne 107 Pre-let 7,302 Hubo

2013 2 Gent Vliegtuiglaan Pre-let 4,334 Decathlon

2013 4 Oostende Torhoutsesteenweg 699 Pre-let 4,148 Decathlon

2014 2 Hooglede Brugsesteenweg 131 Sale 3,756 Salens Motors

Transactions in bold were advised by JLL

Year Qtr City Address Type Sq.m. Retailer

2013 3 Hasselt Kon. Albertstraat 46-48-50 Pre-let 8,000 Galeria Inno

2013 2 Gent Vrijdagmarkt/Langemunt Pre-let 4,456 H&M and H&M Home

2013 4 Brussels Rue Neuve 15 Letting 2,909 Primark

2013 3 Antwerpen Frankrijklei 64 Letting 1,961 Donum

2013 4 Antwerpen Meir 37-39 Letting 1,500 Bershka

2014 2 Gent Veldstraat 67-69 Letting 1,300 Mango

High Streets

Year Qtr City Shopping Centre Type Sq.m. Retailer

2013 2 Kortrijk Ring Shopping Kortrijk Noord Letting 2,100 Albert Heijn

2013 3 Wijnegem Wijnegem Shopping (Extension) Letting 2,082 AS Adventure

2013 2 Ronse Shopping Plaza Letting 1,496 Pronti

2013 3 Wijnegem Wijnegem Shopping (Extension) Letting 1,387 Esprit

2013 2 Liège Galeries St-Lambert Letting 1,377 Esprit

2014 1 Kortrijk K in Kortrijk Letting 922 Food Avenue

Shopping Centres

Retail Warehousing


LARGEST RETAIL INVESTMENT TRANSACTIONS LAST 12 MONTHS

Year Qtr Type* City Building Price MEUR

Yield % Seller Buyer

2013 4 RW Various Cora Portfolio 85 6.3 Cora Ascencio

2013 2 HS Gent Kouterdreef 50 KBC Matexi

2013 3 RW Various Portfolio 7 Retail warehouses 45 Redevco Provestel

2013 3 SC Antwerpen Century Center 40 O'Mahony Quares

2013 3 HS Brugge Zilverpand + 4 shops 35 Aberdeen Bermaso

2013 4 RW Various3 retail warehouses:

Bree, Rocourt, Marche en Famenne

28 Redevco Belgium Pertinea Fund I

2013 4 HS Various Various properties in Flanders 25 Bermaso Various Private

2013 4 RW Various 20 units 23.18 6.39 Private Retail Estates

2013 2 RW La Louvière Parc Haine St Pierre 22.6 Redevco Delcroix

2013 4 HS Leuven Fnac 20 5 Family Klene Groupe Hibert

2014 1 HS Various Portfolio spread over 5 cities 16.8

AG Real Estate (certificate Machelen Kuurne)

Bricorama

*RW : retail warehousing HS : high street SC : shopping centre

Avenue Marnixlaan, 23 b1B – 1000 Bruxelles BrusselT 32 (0) 2 550 25 25F 32 (0) 2 550 26 26

Jan Van Gentstraat 1 bus 402B – 2000 AntwerpenT 32 (0) 3 232 39 30F 32 (0) 3 233 76 85

VINCENT H. QUERTONINTERNATIONAL DIRECTOR - CEO BENELUX+32 (0) 2 550 25 25Vincent [email protected] l l .com

WALTER GOOSSENSHEAD OF RETAIL -BELGIUM+32 (0)2 550 25 [email protected] l l .com

JEAN-PHILIP VRONINKS (*)HEAD OF CAPITAL MARKETS - BELUX+32 (0) 2 550 26 64Jean-Phi l ip [email protected] l l .com

PIERRE-PAUL VERELSTHEAD OF RESEARCH -BELUX+32 (0) 2 550 25 04Pierre-Paul .Verels t@eu. j l l .com

(*) spr l / bvba

www.jll.be

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. It is based on material that we believe to be re-liable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

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The Belgian Retail Market - JLL · The Belgian Retail Market. 2 | pulse | BELGIAN RETAIL MARKET | APRIL 2014 *DEFLATED AND DESEASONALISED **LTM : LAST TWELVE MONTHS ... Brussels,