The following market trends reflect the main opportunities and threats the Bouwinvest Dutch Institutional Retail Fund will take into account as it seeks to meet its strategic objectives in the period ahead.
Focus on optimisation and multi-channel in occupier market
The changing consumer behaviour and demographic shifts are forcing retailers to rethink their store portfolio and location strategy. Some are still focused on expansion, while many are focusing on optimisation, finding the right number of stores to optimise both market share and profitability, while also looking to build a nationwide online presence. We believe this multi-channel mix of bricks and mortar and online sales will shape the future of the Dutch retail market. At the same time, the drop in take-up in 2019 is likely to continue for the foreseeable future as retailers focus on the strongest locations.
Polarisation continues
As the largest cities are also the ones growing the fastest, they continue to provide a strong base for experience shopping in high streets. International retailers remain very much focused on prime locations in the 15 largest cities in the Netherlands. With regard to daily shopping, proximity remains the decisive element, while Bouwinvest is seeing local shopping centres increasingly catering to the ageing population. This is also visible in the investment market, where prime properties are easily traded, while investors are cautious on secondary supply.
Technology improves shopping experience
With technological possibilities on the rise and competition between retailers fierce, technology is playing an increasingly important role in the retail market. This goes for retailers, who can use in-store technology to implement their omni-channel strategies, but also for the owners of stores and shopping centres. These owners are now increasingly using monitoring tools, for example to reduce the use of energy, water and waste or to predict and enhance the flow of passers-by.
Focused segmentation, optimisation and sustainability
The Fund firmly believes that the future of retail real estate will be determined by two very distinct segments of the market, Experience and Convenience. In 2019, we refined our Experience & Convenience investment strategy, which will enable us to hone in on the very best in these two distinctive categories. We also introduced the category ‘Mixed retail’ and defined this category in very specific terms.
While we will be looking for new acquisitions, we will also continue to optimise the standing assets in the portfolio to make them resilient enough to weather (and thrive in the face of) the challenges of the retail market now and in the future. And of course, we will continue to improve the sustainability performance of individual assets and our portfolio as a whole as we move towards achieving our target of a near energy neutral and resilient portfolio by 2045.
Political, economic and pandemic developments creating uncertainty
While the threat of lifted zoning restrictions seems to have been averted, economic uncertainty and slightly slower economic growth could have a negative impact on consumer spending. Global tensions (for example in the field of trade or in the Middle East), the effects of Brexit, pandemic developments and any changes in the ECB's monetary policy (and potential rate hikes) are among the biggest risks for the economy and are therefore also potential threats for the retail market.
The construction and real estate markets are currently being hampered by recent rulings related to nitrogen emissions and PFAS levels. While the government recently introduced temporary legal exemptions to prevent construction grinding to a complete halt, political and environmental debates are ongoing and it remains unclear how this debate will affect the real estate sector.
The continued spread of the coronavirus across the world is affecting the global real economy. Tourism has been and will continue to be badly affected. Due to government policies and quarantine measures, international journeys are being postponed and airlines are drastically cutting the number of operational flights. Trade is subdued, as factories across the world have shut down, impacting global logistics. Experts are currently unable to predict the duration and severity of the pandemic, let alone the overall economic impact it could have. Additionally, central banks are working in tandem to tackle the economic threat of this global crisis.
The impact of the coronavirus will affect our organisation and the Fund’s results and forecasts. In the coming period, we will be monitoring the impact on our organisation and the Fund closely and will inform our investors about the effects of this pandemic and actions taken to mitigate the related risks among others in our quarterly reports and investor calls.
Amsterdam, 23 March 2020
Bouwinvest Real Estate Investors B.V.
Dick van Hal, Chief Executive Officer and Statutory Director
Rianne Vedder, Chief Financial & Risk Officer and Statutory Director
Allard van Spaandonk, Chief Investment Officer Dutch Investments
Stephen Tross, Chief Investment Officer International Investments