The former Mexx store in Mons, Belgium is for rent again after a year-long renovation, but the price is set at 30,000 euros per month - twice the local average. It is a textbook example of how real estate logic sometimes clashes with retail and other interests.
Investors prefer vacancies
The 900 sqm store has been completely renovated and sits in an attractive location on the pedestrian zone in the old city centre - all in all a premium location. The thing that frightens prospective tenants is the price: at 30,000 euros per month, the rent is twice as high as the market average of 200 euros per square metre per year.
The level of the price is caused by property speculation, says Jean-Luc Calonger of the city centre association AMCV (Association du Management de Centre-Ville; Town Centre Management Association): real estate investors would rather have vacancies than have to record a lower value for their properties, he explains to Belgian television channel RTBF.
Real estate bubble in all cities
Although the real rent price after negotiations is likely to drop under the requested 30,000 euros, Calonger is talking about a real estate bubble that can be found in almost all inner cities: a gap has been created between the economic reality experienced by retailers and the financial logic of real estate owners. He fears it is a gap that can no longer be bridged in the long run.
"No retailer can pay this kind of exaggerated rent", Calonger explains, adding that it does not really cause a problem for investors if the premises are empty. A fall in value would be much worse than a loss of rental income, because then it would be at the expense of the resale value, which could also impact on the rest of the property portfolio.
In the specific case of the former Mexx store in Mons, a deal between the city council and the real estate promoter, City Mall, is the root of the problem: City Mall wanted to expand the suburban Les Grands Prés shopping centre, but the city council made investing in the city centre a precondition for this. In order to prevent further speculation, the city of Bergen has now developed a vacancy tax: the fines imposed in respect of vacant buildings have recently been increased in order to have more impact.