International investors look to Belgium retail

Belgium’s shopping center market is ripe for redevelopment, and international investors are seizing the opportunity.

July 03, 2018

In the past five years, around one third of Belgium’s total shopping center stock has changed hands, with Asian, North American and European capital investing in the country.

A total of 12 shopping centers have changed hands since 2013, according to JLL, with year-to-date investment volumes already eclipsing the pre-2013 five-year average of €475 million.

Eurocommercial Properties, from the neighbouring Netherlands, made its Belgian debut at the start of this year, investing €468 million in a 48,000-square meter shopping center to the east of Brussels in Woluwe. Docks Bruxsel, a similar-sized mall also near the Belgian capital, was bought by Canadian institutional capital in May.

Adrian Glatt, Head of Capital Markets JLL Belgium and Luxembourg says that yield compression to levels of around four percent has not deterred buyers from Asia, where comparable shopping center assets would reflect even lower yields.

“It’s still a premium when compared with similar assets other countries. I would expect more international buyers to consider Belgium this year.”

Stable spending, planning prudence
Globally, shopping centers are enjoying more popularity as more landlords adapt their offering to compete with competition from e-commerce.

A key factor for investors is stable purchasing power, something that Belgium offers, since wages remain tied to the cost of living.

“The Belgian consumer is spending at a steady, stable rate,” says Glatt. “Even in the years following the global financial crisis, consumer spending was only briefly impacted, and has since risen steadily.”

Belgium’s multi-level political governance means planning approvals can take time, with the process involving both regional and municipal administrations. This tight regulatory control of development has meant that existing owners of shopping centers have enjoyed little competition from rival malls.

“While there is of course wider discussion about out-of-town shopping centers and their impact on the traditional high street, caginess from planning departments has worked in the favor of existing landlords,” says Glatt. “We have the lowest number of square meters of shopping center space per inhabitant.

“That scarcity of new product makes investing for the first time a much easier proposition.”

Time for change
Lack of competition from shopping center developers has given owners of existing malls little reason to revamp or redesign their retail offering.

The Woluwe mall, with a catchment area of one million people, has not been extended since 1989. With new owners, that is now changing, says Glatt.

“There’s enormous potential for some of these shopping centers to change with the times,” he says.

Across the globe, leisure and recreation are playing a more important role in shopping center design, with customer experience a key element.

In a country not known for the best of weather, Belgian shopping centers are, says Glatt, becoming “destinations for the day”, with food, cinema and leisure keeping customers sheltered and entertained.

Click to read about what the CVA wave on the UK’s high street means for investors.