Retail occupancy in the Netherlands was once again a point of contention in 2023. After a stable year in which the vacancy rate was around 6% for a long time, it rose slightly to 6.2% in the last quarter, according to research firm Locatus. Although this is a slight increase, the number of retail metres in use remains the same as the record year 2023. This means that new retail metres have been added, indicating a growth market. Retail expert Hans van Tellingen stressed that this development shows that the retail market continues to grow despite challenges.
At the same time, large differences were visible within different retail segments. This trend reflects both challenges and opportunities for the retail sector and investors. What exactly has changed in the retail landscape and what does this mean for the future? The blog below from Annexum, specialist in retail real estate investing, answers this question.
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The role of bankruptcies and transformations
By 2023, the number of entrepreneurs declined by almost 3,000, especially in the retail and hospitality sectors. Large chains such as BCC and Scotch & Soda went bankrupt, contributing to the increase in empty premises. Nevertheless, the impact of bankruptcies remained limited, as many entrepreneurs quit for other reasons, such as retirement and lack of business succession. The challenges of decreasing numbers of retailers due to bankruptcies are offset by transformations and new shop openings. On balance, this results in the slight increase in vacancy rates.
Significant differences between large cities and inner cities
There are significant differences between cities when it comes to vacancy rates. In the first quarter of 2024, the pace of vacancy in the 40 largest inner cities accelerated, with 2,500 shops now waiting for a new tenant. This amounts to 8.3% of the total number of retail properties, real estate consultant Colliers reported in its retail market report. Smaller towns are particularly struggling, with a vacancy rate of 11%, many of which have been vacant for more than a year.
This increase is partly caused by rising costs for retailers and the need to pay off corona debts. In cities with 70,000 to 100,000 inhabitants, one in 10 shops now has no tenant. These towns face a lot of competition from larger cities where people prefer to go for a day trip, as well as neighbourhood shopping centres for daily shopping (essential retail). In the five largest city centres, vacancy rates rose to an average of 6.1%, with Rotterdam being the negative outlier at 10%.
Nevertheless, demand for physical shops remains, especially in large city centres such as Amsterdam, Rotterdam and Utrecht. Here, shops still attract many shoppers, despite competition from online shops. Municipalities play a crucial role in tackling vacancy by transforming retail premises into other functions, such as residential or office space. This process is supported by zoning changes and subsidies.
The future of the retail market: opportunities and challenges
The slight increase in vacancy rates in 2023 and the variability in occupancy rates within the retail sector raises questions about the future of the retail market. While the decline in the number of active retailers raises concerns, the addition of new retail metres offers opportunities for growth. In addition, certain sectors within the retail segment offer opportunities (essential retail). For investors, the key lies in responding strategically to market developments within the retail segment and taking advantage of municipal policies to add value to their property portfolio, such as transformation opportunities.
Source: Annexum