RETAIL

Keypoints

  • Stabilizing consumer confidence in the second quarter of 2024
  • Retail sales increased by 2.9 percent due to higher sales volume
  • Online retail revenue saw modest growth, driven by food and drugstore products
  • The number of bankruptcies in the retail sector significantly decreased last quarter
  • Investment volume in retail real estate has increased with stabilizing initial yields

Increasing revenues, persisting challenges

In the second quarter of 2024, the view of the Dutch investment market in retail is mixed. After a steady improvement in consumer confidence from the end of 2022 until mid-March of this year, stabilization has been observed in recent months. Confidence is currently hovering around -23.

At the same time, the Dutch retail sector recorded a 2.9 percent increase in sales compared to the same month last year. This growth has been ongoing for more than three years. This increase is primarily attributed to higher sales volume, which was 3.6 percent higher in May 2024 than in the same month the previous year. The largest sales increase can be found in the consumer electronics sector with 8.5 percent, while stores for other household items saw a decrease of 9.2 percent compared to a year earlier.

HOOGSTRAAT - THE HAGUE

Source: Achmea by Real Estate

CONSUMER CONFIDENCE (BALANCE OF POSITIVE AND NEGATIVE RESPONSES)

Source: CBS (2024), edited by Achmea Real Estate

RETAIL SALES DEVELOPEMENT (% CHANGE, YEAR-ON-YEAR)

Source: CBS (2024), edited by Achmea Real Estate

Online sales were 1.6 percent higher than in the same period last year. This increase is mainly due to the sales of stores that operate solely online, which saw a year-on-year sales increase of 7.2 percent, while multi-channel retailers scored 5.3 percent lower than last year. Food and drugstore products performed particularly well, with this sector achieving 5.2 percent more sales via the internet than the previous year. The retail sector for clothing and fashion items saw a decline of 4.8 percent, in contrast with the rest of the retail market. The non-food sector sold 4.5 percent more, while food stores saw no growth compared to last year.

In the second quarter of 2024, there was a significant decrease in the number of bankruptcies in the retail sector. In May 2024, the number of bankruptcies in retail stood at 20, with an average of 24 over the past three months. This is considerably lower than the previous quarter and the long-term average. Despite the decrease in bankruptcies in the second quarter, a future increase should be anticipated. As of July 1, 2024, the tobacco ban for supermarkets will come into effect. This is expected to impact supermarket sales, with the supply shifting to gas stations, tobacco shops, and convenience stores. Moreover, the ongoing shortage of staff will make hiring increasingly expensive. It is expected that local village supermarkets will be particularly affected by this. They rely not only on the direct revenue from tobacco sales but also on the additional groceries that consumers purchase along with tobacco products.

OOSTPOORT - AMSTERDAM

Source: Achmea Real Estate

DEVELOPMENT OF ONLINE RETAIL SALES (% CHANGE, YEAR-ON-YEAR)

Source: CBS (2024), edited by Achmea Real Estate

BANKRUPTCIES IN RETAIL (ROLLING 3-MONTH AVERAGE)

Source: CBS (2024), edited by Achmea Real Estate

Stabilizing rent and vacancy levels

In the first part of 2024, Dutch consumers increasingly searched for discounts, primarily due to ongoing high inflation and fragile consumer confidence. Despite this focus on price consciousness, the total amount spent by consumers rose to €20.4 billion, an increase of 1.1 percent compared to the previous year. This growth was mainly driven by expenditures in the “fast moving consumer goods” (FMCG) category, such as supermarket and drugstore products. At the same time, more money was spent on premium items, where convenience and functionality justified the higher price.

For a large portion of consumers, brand trust has proven to be the most decisive factor in purchasing products. Trust in a brand is more important for many Dutch consumers than regular discounts. Consumers indicated that they trust brands less nowadays, mainly due to an increase in misinformation in general. These trends are also reflected in the user market; discounters such as Aldi and Lidl saw a significant increase in their market share in the second quarter of 2024. Consumer price consciousness seems to be translating into their shopping choices. However, Albert Heijn has also managed to increase its market share. Consumers are visiting fewer different supermarkets for their weekly groceries, and Albert Heijn provides a full-service solution.

Looking at vacancy rates, they are stable for almost all shopping areas. Only regional shopping centers have experienced a significant increase in vacancy rates. The stability in vacancy rates is also reflected in the development of rental levels. For three quarters, no decline in rents has been observed. Since the last quarter, a slight increase in rents has been observed in the G20 cities. After years of declining rental prices, there seems to be room for growth again. The supply and turnover of available relocations remain scarce in the best shopping streets. This foundation appears to offer opportunities for a continuing trend.

DEVELOPMENT VACANCY (%) BY TYPE OF SHOPPING AREA

Source: Locatus (2024), edited by Achmea Real Estate

DEVELOPMENT OF RENT LEVELS PER CLUSTERING OF CITIES (2010 = 100)

Source: C&W (2024), edited by Achmea Real Estate

Renewed interest in retail investments

It is clear that stabilizing macroeconomic factors such as interest rates, inflation, and rental levels contribute to a reduction in uncertainty and investor caution. This is also reflected in the investment volume in retail. Both the first and second quarters of 2024 were higher in absolute terms than in 2023. Last quarter, the investment volume was €0.2 billion. This is lower than the previous quarter (€0.37 billion), but significantly higher than a year ago (€0.09 billion).

In the past quarter, initial yields have slightly increased. High Streets in Amsterdam have shown stable development; initial yields have remained at the same level. Other cities have shown stabilization or a slight increase. The financeability of retail real estate is slowly improving. There is renewed interest and attention for retail real estate from the financing market.

INVESTMENT VOLUME RETAIL PER QUARTER (IN BILLIONS €)

Source: RCA (2023), edited by Achmea Real Estate

SHIFT INITIAL YIELDS PER CLUSTERING OF CITIES (2010=100)

Source: C&W (2023), edited by Achmea Real Estate

Outlook

In 2024, the retail sector is facing various changes. 'Experiential shopping' in physical stores is increasing in response to the popularity of online shopping. Inflation is making consumers more price-conscious, creating opportunities for discount and budget retailers. The impact of "Covid-savings" is waning, with consumers focusing more on essential spending and deals. Luxury goods remain attractive to younger consumers, while the mid-market segment is under pressure, as seen with chains like Ted Baker and Scotch & Soda.

Retailers are experiencing margin pressure and investing in efficiency, such as warehouse automation. The demand for second-hand luxury items is growing due to sustainability and cost-awareness, with major companies like Amazon entering the market. Despite challenges, sales volume continues to rise, and after years of decline, rent prices are stabilizing or increasing. Institutional investors are becoming more active, particularly in urban retail properties, taking advantage of favorable market conditions.

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