Even prime retail locations lose their value

The value of retail property is now also beginning to decline in prime locations. This trend has spread from the United Kingdom to the Netherlands and is beginning to wreak havoc in Belgium too.

Massive debits

Even retail real estate in what is traditionally regarded as a prime location – historic shopping centres in cities – is now beginning to decrease in value. While secondary locations have been in freefall for some time, the top locations had so far escaped this trend. That is now a thing of the past, is the Financieele Dagblad’s conclusion from the half-year results of large real estate funds.

The Vastned fund saw its portfolio in the Netherlands – mainly retail properties in historic city centres – fall in value by 2.9 million euros over the past six months. In the same period last year, the value still increased by 13 million euros. The same downward trend can be seen at competitors Wereldhave and Unibail, according to the same Dutch newspaper.

Just the beginning

However, the biggest wave of devaluation is yet to come, analysts believe: “We have very negative projections about the main shopping street”, Herman van der Loos from DeGroof Petercam says. He points to the widening gap between retail properties at prime locations and secondary locations, which may now be corrected.

It is an international phenomenon, because Cushman & Wakefield is also starting to show a downward trend in Belgian shopping cities: large properties in particular are more difficult to fill in and retailers are renegotiating their contracts to obtain lower rents.

More cautious and innovative

The trend started in the United Kingdom, where vacancies have been troublesome for years and now a “retail storm” in the field of real estate is raging. It is no coincidence that the British penetration of e-commerce is among the highest in Europe. “Regarding the value of the buildings, the general feeling is that British retail value has fallen earlier,” Tom Berkhout of Nyenrode Business Universiteit said.

Nevertheless, Cushman & Wakefield is also seeing positive developments, particularly in Belgium: the demand for retail warehouses remains high, and retailers are also starting to adapt to the new landscape, with new concepts and technologies. The physical store will continue to play an important role, “although retailers and landlords must be more cautious and innovative.”