Navigating the retail investment landscape: 5 current market trends on overcoming capital constraints in a positive market

1. Resilient Retail: Positive sentiment and strong performance amidst market challenges

Despite the challenging financial market conditions and elevated interest rates, the retail sentiment remains positive, indicating a robust performance within the sector. Consumer activity continues to show an upward trend and retailers express confidence in their sales volume. While the escalating cost of capital presents an increasing obstacle to investment opportunities, it is noteworthy that retail consistently outperforms other asset classes, making it an attractive choice for investment.

2. Wealthy private investors continue to spearhead investments in retail properties.

Due to the prevailing high interest rates, the pursuit of value creation through maximum leverage has become significantly less viable in the current market. As a result, a notable trend has emerged among certain private investors who opt to make cash purchases, thereby aligning with their overarching strategy of safeguarding against inflation and preserving value. These private investors possess relatively higher levels of equity or cash reserves and rely less on loans. While their level of activity has experienced a slowdown in recent months as well, their participation has played a pivotal role in supporting the investment market.

3. Tourist hotspots drive performance in Bruges, Gent, and Antwerp

Prominent tourist destinations such as Bruges, Gent, and Antwerp continue to witness a notable surge in demand, a trend which is evident among both retailers and investors who consistently prioritize these cities due to their strong market appeal. The primary setback experienced earlier in the year was largely attributed to the extended period of inclement winter weather. However, their status as prominent tourist destinations ensures the retail sector in these cities continues to thrive, displaying minimal signs of weakened purchasing power. Furthermore, despite the prevailing high indexations, the shops located in city centers have undergone rent corrections during the Covid era, resulting in relatively attractive rental rates.

4. Shifting Dynamics: City centers gain ground on out-of-town stores

Historically, out-of-town stores have showcased stable growth over the past few decades. While this segment continues to thrive, there is a noticeable shift as city centers are now catching up, driven by a healthier business climate. 

The inner-city retail market has experienced a rent correction during the Covid-19 pandemic, creating a relatively favorable and conducive environment for retailers. This has sparked renewed interest and increased activity in the inner city, with a growing appetite for investment and transactions. Between 2018 and 2021, rental adjustments in the inner city provided financial relief for retailers, leading to improved profitability and expansion opportunities. Notably, the previous year marked a peak period for the city center, characterized by heightened activity and take-up of retail space. While the city center has displayed a somewhat more fluctuating performance, it is currently experiencing a healthy momentum with interesting investment opportunities.

5. Powering retail investments: Exploring solar panels and charging stations

New environmental guidelines and technologies, such as solar panels and electric charging stations provide opportunities to establish a secondary profit model while simultaneously enhancing the functionality of the retail property and aligning the investment with Environmental, Social, and Governance (ESG) criteria. By incorporating solar panels and charging stations, investors can generate additional income streams. Financial institutions are also displaying a growing interest in supporting such projects, often resulting in favorable financing conditions. In Belgium, numerous prominent investment funds are actively involved or in the process of entering the charging station market, signifying its burgeoning activity and appeal.