15/05/2020
Future of Retail real estate in Luxembourg 2020.
Following on from my post last Friday, let’s have a look at the retail real estate sector in Luxembourg.
Retail in itself is a diverse asset class consisting of shopping centres, high streets, retail parks and hypermarkets.
Covid-19 will influence end users in unique and unprecedented ways in 2020 however one theme that will be consistent is the rise of e-commerce.
With social distancing the short term viability of shopping centres and retail parks looks bleak with only supermarkets and hypermarkets showing resilience. What remains to be seen is the increase in costs for these larger centres as there will undoubtably be an increase in sanitation requirements and the face of food retail may be significantly changed in the coming months.
For me most interesting of these retail sub-categories is the high street. I have witnessed an increasingly dis-jointed approach over recent years which include unrealistic yield/price expectations and outdated buildings which has to change.
The decline of the High street in Luxembourg has been exacerbated by increasing investments in commercial centres over the years however as we have now seen they are more vulnerable in a pandemic, today’s pandemic is a catalyst for disruption. Online shopping has hit new highs and with social distancing e-commerce provides an attractive platform that retailers can simply not ignore.
Data compiled from credit card providers also highlights the fact that consumers are spending more on experiences and less in physical retail.
The keyword therefore is experience as we know Flagship stores are here to stay for exactly this reason. So to cut it short my prognosis for 2020 is that only prime retail addresses will continue to be in demand.