Dutch shopping streets were fuller at the end of 2022 than they have been in years. But that’s mainly because they get smaller every year. Again, 3,700 retail spaces ‘disappeared’ in Dutch towns and villages last year. In some cases because they were demolished, but much more often because the landlord decided to convert them into offices or homes.
Because the stock of retail properties fell last year, vacancy also decreased rapidly, market researcher Locatus noted on Monday. Every year at the end of December, the figures specialist measures which retail properties in Dutch towns and villages are filled and which are not. According to Locatus, 6 percent of all 212,000 retail spaces in the Netherlands were empty at the end of last year.
Last year, 6.7 percent of all retail property was without a tenant. Even a year earlier that was 7.5 percent – a level that was reached in 20 years in 2015 alone. That peak was partly due to the outbreak of the corona pandemic in early 2020, after which consumers decided to avoid the busy shopping streets for the rest of the year.
Shrinking shopping streets
At first glance, such a downward trend is hopeful. The physical shopping street has been struggling for years, partly due to the rise of online shopping and the collapse of several dozen large chains. Nevertheless, the falling vacancy rate says little about the vitality of physical stores. Not only empty retail properties disappeared, but also about 2,000 filled retail properties.
This shrinking of shopping streets has been going on for some time. After the economic crisis of 2008 hit the retail trade in full force some five years later, vacancy became a serious problem. Because although the remaining ones have since opened new branches, and some webshops such as Coolblue decided to expand to the high street, the number of shops has decreased on balance in recent years.
In 2019, this was reason for real estate advisor CBRE to predict that a quarter of the total retail space would be redundant four years later. Municipalities decided to respond to such prospects by actively reorganizing inner cities. Together with landlords, they have tried in recent years to make centers smaller but busier. By urging shops in the neighborhood or on the edges of the center to move to the main shopping streets. The empty buildings that were left behind were then given a different destination.
Shops become homes
Since 2015, more than 10,000 retail properties have been converted to a different type of space, according to figures from Locatus. But with 3,700 repurposed properties, that process went much faster than before last year. It shows that 2022 was mainly the year in which landlords decided to exchange declining retail rents for a source of income that is rising: home rental.
This contraction in supply is on balance, incidentally, notes lead researcher Gertjan Slob of Locatus. For example, roughly 4,900 new retail properties were opened last year, which means that roughly 8,600 existing locations have been converted or demolished. To a large extent, according to Slob, these were buildings that still had a tenant who decided to stop. Because the shop owner wanted to retire, for example.
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The filled buildings that disappeared were mainly in outlying areas, such as residential areas, according to Locatus’ research director. In the busy shopping centres, it was mainly buildings without tenants that were converted. When asked, Slob could not say on Monday what kind of shopping areas the nearly five thousand new locations have been added to.
Although vacancy rates are decreasing nationwide due to the redesign of shopping areas, the effect is not equally strong everywhere: it differs per region, but also per type of shopping area. For example, the centers of medium-sized towns with 200 to 400 shops (size Bussum, Delft) have been struggling above average for years. At the end of last year, the vacancy rate there was still almost 12 percent, despite two years of decline.
Also problematic, but to a lesser extent, are ‘supporting’ shopping centers in the country’s largest cities, where more than 9 percent of the shops are still vacant. Examples are Amsterdam Osdorpplein or Nijmegen Dukenburg. The vacancy rate is lowest in what Locatus calls the ‘dispersed retail area’ – outside the fixed shopping areas: less than 3 percent.
While Locatus is cautiously optimistic about the future of the Dutch shopping streets due to the falling vacancy rate, real estate agents’ association NVM recently showed itself quite concerned. In a survey of retail property, the NVM found three weeks ago that demand for retail properties remains under pressure, because retailers were confronted with “rising costs and uncertainty” after the corona pandemic, partly due to the war in Ukraine.
High inflation
The brokers’ association points to the rising retail rents: many retailers saw the bill for their premises rise sharply this summer because their landlord allowed it to rise at the pace of high inflation. The energy bill also rose sharply in a short time, and it became much more difficult to recruit staff.
In the coming year, shops will suffer from high inflation, rising interest rates and a lack of consumer confidence. Add to this a “probable economic recession” and the “uncertain times” for retailers are far from over, according to the NVM. This will have an “irrevocable effect on the use of retail space”.