netherlands - dutch retail market special 2009 eng

Retail Market Special 2009

The transforming high street

Advance • Retail Market Special • Transformation of the high street • 2

Foreword

The high street is undergoing a transformation. The prevailing financial climate, which combines economic

contraction with extremely sluggish growth, is putting pressure on retailers. As retail sector turnover falls,

retailers are compelled to find new accommodation or close underperforming branches, resulting in rising

vacancy levels. At the same time, the rise of online shopping is causing certain sectors to retreat entirely

from the high street, while promoting long-term growth among others. This second 2009 Retail Market

Special presents our take on a range of retail market trends and developments, and their implications for

the retail property market. This issue focuses on high streets in the city centre, presenting three different

themes to highlight the transformation of the Dutch high street.

The previous issue of the Retail Market Special focused on online shopping and its impact on retail prop-

erty. Online shopping will cause some retail sectors to disappear from the high street and demand for retail

space to fall. At the same time, brands are becoming far more discerning about their choice of location and

are focusing more heavily on specific target groups. There is a greater imperative for brands to make a

name for themselves, due in part to the rise of online shopping. The high street is increasingly becoming

a ‘retail experience’ area, where single-brand stores are increasing in prominence. As a result, the high

street itself is becoming an extended showcase of various leading brands.

Rising vacancy levels in those roads leading to shopping areas is another immediate consequence of

online shopping on the retail property market. Many municipal authorities are currently faced with the

question of what to do with these roads. This issue of the Retail Market Special more closely examines this

issue and describes the preconditions necessary to ensure the success of the secondary roads leading to

prime shopping areas.

The third theme is sustainability, which has recently gained in importance despite – or perhaps precisely

because of – the economic crisis. Retailers are focusing more heavily on the sustainable production of

goods and are paying more and more attention to their own CSR policy. How long will it take before sus-

tainable retail property will play a decisive role in the market?

These three themes illustrate the key shifts the Dutch high street is undergoing. Although it is as yet impos-

sible to say how these changes will manifest themselves, this issue of the Retail Market Special attempts

to offer an indication of the direction of change, enabling investors, developers and retailers to prepare for

a new retail landscape with different challenges.

Richard Dallinga Ruben Langbroek

National Director Retail Head of Research

3 • Advance • Retail Market Special • Transformation of the high street


Increasing Internet sales leads to more distinction in Dutch shopping areas

For years, the Internet has been an inextricable part

of modern society. Nowadays, it is used for a wide

range of applications, including keeping abreast of

the latest events (news sites), as well as banking,

ordering food and buying consumer goods. For

years, the Netherlands has ranked among the top

countries in household Internet penetration. In addi-

tion, the percentage of residents in the Netherlands

shopping online increases each year. In 2009, 68%

shopped online (see Figure 1), representing a 13%

increase compared to 2008.

The previous issue of the Retail Market Special

focused on online shopping and its impact on re-

tail property. That issue forecast an increase in the

share of total non-food online expenditures from

3.4% in 2007 to 8.5% in 2012. As a result, we ex-

pect demand for physical retail space in Dutch city

centres to decrease by as much as 7% to 9% in the

next five years. This issue presents our expecta-

tions about the impact of online shopping on the

appeal of high streets.

Developments, motives and trends

The number of residents in the Netherlands with

an Internet connection continues to grow and now

totals nearly 12 million. In the past year, 7.5 mil-

lion people in the Netherlands between the ages

of 16 and 74 shopped online. Statistics Nether-

lands reports that the Netherlands leads Europe

together with Denmark and the UK in this regard.

However, this growth will stabilise in the years to

come. Growth is seen primarily in the frequency of

products ordered online, which will continue to in-

crease as consumer confidence and familiarity with

online shopping grows. Figure 2, which presents

the turnover data for the 2005-2009 period, clearly

shows growth in online spending.

.

Figure 1:

Percentage of

online shop-

pers by year

Source: Statistics

Netherlands (2009)0%

10%

20%

30%

40%

50%

60%

70%

80%

2005 2006 2007 2008 2009


Total online expenditures are increasing each year.

As the amount consumers spend will remain level,

this growth will come at the expense of expendi-

tures in the physical shops. The extent of this shift

differs according to retail sector, which can be seen

in Figure 3. In the 2005-2009 period, every retail

sector saw an increase in the share of online sales.

The leisure sector in particular experienced dramat-

ic growth. The percentage of consumers purchas-

ing clothing, sporting goods or books or booking

holidays or accommodation online has increased

substantially in recent years.

The primary reasons encouraging consumers to

shop online include:

æ The products’ online price is often lower than

the price in the shop.

æ The product can easily be ordered from the

convenience of home.

æ It is possible to see right away whether the prod-

uct is available in stock.

æ The product is not sold in stores or it is not

known where it is sold.

æ The opening times of physical shops are too

restrictive.

Consumers will tend to look up information online

prior to actually making purchases to select a spe-

cific product or to ge an idea of the price. As a result,

consumers will be better informed when they actu-

ally make purchases. It also means that consum-

ers will visit shops with a more specific purpose in

mind. This will be particularly true of product groups

including electronics and photography equipment,

etc. With consumers selecting the product of their

choice at home, retailers will no longer necessarily

have to have a traditional A1 location. There will be

a shift in the products sold in the shops and the

products sold online. Retailers with largely compa-

rable lines of standard products will have to launch

initiatives in fringe markets.

The key reasons cited by most internet shoppers for

making purchases online include convenience and

the speed. In addition, the lower prices and larger

selection are key factors. This applies primarily to

holiday travel and accommodation, which is the

most commonly named online purchase. This is al-

ready apparent in the Dutch high street, where trav-

el agencies are slowly, but surely disappearing. In

addition to travel agencies, the number of branches

of shops specialising in CDs/records, DVDs, books

and electronics has dropped significantly. Flexibility

is another key reason to shop online. The opening

times of shops in the Netherlands remain restricted

despite consumers’ calls for greater flexibility. In

this regard, the Dutch government’s current plans

to limit the number of Sundays when trading is per-

mitted will not improve this situation. Online retail-

ers, however, are open 24 hours a day and are,

consequently, better able to respond to the prefer-

ences of the modern consumer.

Figure 2: Trend in online shopping turnover Figure 3: Share of online sales according to retail sector

Source: HBD Thuiswinkel Markt Monitor, Blauw Research/Thuiswinkel.org, 2009 Source: Statistics Netherlands (2009)

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009

Clothing and sporting goods Films and musicBooks, magazines and newspapers Software/hardware and electronics-Travel and accommodation Household goods and appliances

Online retailbestedi

€-

€1

€2

€3

€4

€5

€ 6

Online retail expenditures Other online expenditures

*€ 1 mrd


One of the additional benefits of online shopping is

the tremendous selection offered and the ability to

compare products. Product comparison sites have

boomed in recent years, which enable consumers to

compare the products of their choice, primarily with

respect to price. These sites enable consumers to

be better informed and more cost-conscious when

making purchases. Popular examples of such sites

include Kieskeurig and Vergelijk. Consumers often

already know (sometimes based on research done

at an actual shop) which product they want. They

can then visit one of these product comparison

sites to see which online shops sell the product in

question at the lowest price. Another type of online

shop that is gaining in popularity is one that offers a

different product each day at bargain price. iBOOD,

which is available in various countries in Europe, is

a good example. Each day, this online retailer posts

a new offer on its site. Although this site features a

variety of products, they are generally electronics.

There are comparable examples in other sectors,

including the fashion industry. The shopVIP online

‘community’ regularly offers leading A brands at a

considerable discount.

Nearly every retail chain now has an online shop,

where its own products can be ordered. Several re-

tailers, including Free Record Shop, offer the option

of placing an order online and picking up the prod-

uct at the consumer’s nearest branch. This helps

consumers to avoid paying shipping costs, which

many still see as a downside of online shopping.

Online retailers offering ‘free shipping’ or the option

to pick up a product free of charge at a warehouse,

often in remote locations at an industrial estate, are

gaining ground. In the future, physical shops could

come under increased threat due to this develop-

ment.

Several key problems with online shopping cited by

consumers include:

æ It is not possible to see, feel or try/try on the prod-

uct. This applies primarily to clothing, sporting

goods and furniture.

æ The product cannot be delivered immediately.

In physical shops, you can take the product with

you.

æ Shipping costs have to be paid.

æ Consumers without a credit card cannot buy on-

line. There is an effective alternative available in

the Netherlands (i.e. iDEAL online direct debit

system).

Online shopping is transforming the high streetGrowth in online shopping will cause total demand

for retail space to fall. This development will, how-

ever, not necessarily impact A1 retail locations in

the major cities, but will be primarily apparent in

the secondary roads surrounding central shopping

areas. The core shopping areas of small- and me-

dium-sized towns may also feel the bite. The rise

of online shopping will cause total demand for re-

tail space to fall. Although certain retail sectors will

disappear from A1 shopping areas as a result, the

variety seen among the retailers who remain will in-

crease as they work to distinguish themselves from

the rest. As other retailers trade up to newly vacant

A1 retails units, vacancy levels among B locations

will increase.

The previous issue of the Retail Market Special

described which product groups will be most and

least affected by online shopping. Fresh produce,

large consumer goods and luxury goods will most


certainly be affected, with the Internet playing a

supporting role. For instance, although the super-

market chain Albert Heijn offers an online ordering

and delivery service, the majority of groceries are

purchased in physical shops.

The overwhelming majority of turnover for cosmet-

ics and personal care products also continues to

be generated in physical shops. Consumers want

to see the products in person, which is not possible

online. Clothing must often be tried on to see how it

fits or to see if it goes with other clothing purchases.

Of course, there is the option of trying on clothes

or shoes in a shop and actually buying them later

online. In addition, it is becoming increasingly com-

mon to purchase wardrobe basics online. Consum-

ers often already know which size T-shirt or dress

shirt they require, the ‘fit’ and quality threshold is

low, and these products can be purchased online.

In time, this will result in a situation in which the

shops will sell more specialist products. H&M offers

consumers the option of returning clothing ordered

online to a physical shop if they are not satisfied.

Retail sectors that will increasingly retreat from the

high street due to the rise of online sales include

CDs/records, books and travel/accommodation.

The experiential aspect of the physical shops in

these retail sectors will become increasingly im-

portant. A good example is the Selexyz bookshop

branch in Maastricht, which is located in a church.

Next year, a bookshop in Zwolle will also open a

branch in a church.

Online shops do not always pose a threat to physi-

cal shops. In some cases, the online presence can

serve as a springboard for a physical shop. Howev-

er, examples of this are as yet still limited. One such

case is the consumer goods retailer CoolBlue. After

successful growth online, the company has mean-

while opened three physical shops in the Nether-

lands (Rotterdam, Groningen and Eindhoven) and

one in Belgium (Antwerp).

The long-term impact of online shopping on the

retail property market is not yet known. It is clear,

however, that the number of online purchases

increases each year. In an article recently pub-

lished in the daily newspaper Financieel Dagblad,

the online retailer Wehkamp indicated that the lines

separating high street shops and online shops are

starting to blur. In five years’ time, the company

expects a new equilibrium to arise between both

methods of shopping, with 20% of all purchases be-

ing made online.

This development also entails falling turnover per

square metre of retail floor space. The drop in

turnover will differ from sector to sector. In addi-

tion, the growing number of retailers which prefer

larger units to market their products will also impact

turnover. In response to falling turnover per square

metre of retail floor space, retailers will more com-

monly draw funds from their marketing budget to

meet their lease commitments.

While smaller retailers stand to benefit from a larger

sales market and recognise the complementary ad-

vantages of online activities, larger retailers focus

on the need for a dedicated online sales channel


and business unit, as well as the associated costs

and benefits. In response to falling turnover of phys-

ical shops, the continued necessity of retail space

will be questioned as retailers aim to generate a

return on total investment. In the future, only retail

space deemed to offer added value will be retained.

A new equilibrium will have to be found in which the

impact of online shopping is not merely negative

and in which the combination of online retail activi-

ties and physical shops presents opportunities.

For many people, shopping continues to be a lei-

sure activity (i.e. shopping for fun), as part of which

consumers visit, for instance, experience centres or

zones where they can wander around and explore

the area (‘pedestrian zones’). In the future, the

high street as we know it will increasingly become

a stage for major brands. It is possible that in the

long term, multi-brand stores will disappear from

the high street and be replaced by single-brand

stores, flagship stores and experience centres.

More and more brands will open their own shops to

raise their profile. For example, Nivea has opened

its own retail outlet in Berlin, M&M’s has its own

shop in New York City, and Amsterdam is home to

the brand store Heineken – The City.

One type of multi-brand store that will endure is the

shop-in-a-shop, as part of which the identity of each

brand clearly remains intact. In response to the rise

of online shopping and changing consumer needs,

Dutch city centres will lose their role as shopping

areas, and high streets will increasingly become the

marketing stages of various leading A brands. It will

become increasingly critical for an area to establish

an identity in relation to the retail image. Retailers

will become far more discerning about their choice

of location and will focus more heavily on specific

target groups. While this focus on brand position-

ing and branding will increase brand diversity on

the high street, the range of shops on Dutch high

streets will – due to the continued growth of online

shopping – become even more monotonous, with a

clear focus on fashion.


Reducing main shopping areas requires an active policy for approach roads

Vacancy levels in the approach roads to shopping

areas and more secondary pitch are rising. Due in

part to rise of online shopping and the economic

recession, businesses and retailers are more fre-

quently forced to close their shop doors. In the past

year, the number of bankruptcies was twice the

normal rate.

What does the future hold in this respect? What can

the government do to retain the appeal of these key

roads in the city centres?

These approach roads serve as the gateway to an

A1 shopping area. With the growing presence of

retail chains in A1 shopping areas, the approach

roads will increasingly become the stage by which

a city’s shopping area can set itself apart from the

rest. They will serve as a city’s showpiece. Accord-

ingly, it is essential for a shopping area to distin-

guish itself by promoting diversity in the retail offer-

ings in the approach roads.

In broad terms, approach roads can be divided into

two categories. The first involves those situated on

the periphery of the core shopping area in a pedes-

trian zone. These are often found at the extreme

ends of the main high street. Examples include Ri-

jnstraat in Arnhem and parts of Haarlemmerstraat

in Leiden.

The second involves approach roads accessible

by car and which offer short-term parking. This

enables consumers to make purchases or access

services in a quick and targeted manner. These

locations are home to starting businesses and en-

able consumers who know what they want to do

their shopping quickly and efficiently. They are also

home to a range of restaurants, bars and ancil-

lary services. Examples include dry cleaners, wine

dealers, hair salons and chemists. These approach

roads typically serve as traffic routes to A1 shop-

ping areas. The consumers in these roads are in a

hurry, and the shops are often busy with consumers

coming from the city centre. Figure 4 presents the

key differences between the two types of approach

roads.

Differences in approach roads Approach roads - Periphery of A1 shopping areas

æ Adjacent to A1 shopping area

æ Shops are unrelated

æ High vacancy levels

æ Often limited to retail function

æ Pedestrian zone

Approach roads - Traffic route

æ Route runs from central points

æ Targeted or impulse shopping

æ Shops are unrelated

æ Busy with consumers from the city centre

æ Often serve various purposes (traffic route, etc.)

æ Consumers are in a hurry


Approach roads can also be combined with a dis-

trict or neighbourhood function. Haarlemmerdijk

in Amsterdam is a good example. This street of-

fers a range of shops, including clothing and gift

stores, and serves a neighbourhood function with

the presence of such shops as Albert Heijn, Etos

and Blokker.

In addition to the two types of approach roads iden-

tified, there are also ‘wandering zones’. Although

these areas often include approach roads, they

have a different character. These roads are appeal-

ing residential areas with a pleasant ambience and

are often home to a mix of small, unique shops,

interspersed with restaurants, pubs and cultural

activities. In addition, there is usually the ability to

walk along a closed-circuit route. Consumers take

the time to wander around these zones. Accord-

ingly, these zones offer a city a distinctive charac-

ter. The Negen Straatjes area in Amsterdam is one

example.

Marketing and Branding

Marketing is a key aspect determining the suc-

cess of approach roads leading to shopping areas.

There are a variety of examples of how municipal

authorities and business associations promote their

shopping areas. There is, for example, the website

NLstreets. This online search engine presents infor-

mation about pleasant roads with enjoyable shops

outside of the A1 shopping areas in 30 cities in the

Netherlands. This site enables visitors to enjoy a

virtual walk along these shopping roads and see all

the shops on offer. Each week, NLstreets features

one of the roads in the free daily newspaper De

Pers with an offer at one of the shops on the road

highlighted. The website Shopgids also presents a

large number of shops in the Netherlands. In ad-

dition, the site proposes various themed shopping

routes in each city. These routes include special

shops located on the approach roads and in the

main shopping area.

Several cities also publish special theme guides.

Haarlem, for example, is one of the cities to publish

a guide for those who shop for fun. The city is home

to many specialist shops and boutiques, spread

across the city centre in main shopping roads, ap-

proach roads and ‘pedestrian zones’. The guide,

which includes information about shopping in Haar-

lem, can be obtained at the VVV tourist information

office and in the various specialist shops and retail

outlets located in the approach roads to shopping

areas in Haarlem. In addition, the organisation City

Marketing Haarlem is promoting familiarity with the

city. This organisation also publishes a variety of

guides, including detailed walking routes along

shops with a certain theme. For instance, there is a

home furnishings route, a fashion route, a vintage

items route and a bookshop route.

In addition to marketing the shops in the approach

roads and ‘pedestrian zones’, it is essential to invest

in the public areas of these locations. A well-main-

tained and cared for appearance of a street creates

a pleasant residential area, which in turn serves

as the basis for attracting appealing shops. Folk-

lingestraat in Groningen is a good example of a

street, which was enhanced by renovation of the

public area. In 1994, the street was refurbished

Pedestrian Zones

æ Closed-circuit walks

æ Interesting and/or unique small shops

æ Shop cohesion based on character (ability to

browse around, target group or specialist nature)

æ Within walking distance of the city centre

æ Often serve various functions (residential and

cultural)

æ Consumers have time to wander and explore

Pedestrian zones


as part of the municipal project Binnenstad Beter

[Better Inner City]. Part of the project involved an

art project, which focused on the street’s history

– once the birthplace of Groningen’s Jewish com-

munity. In the end, the attractiveness and mood of

the renovated street served to draw antique deal-

ers, art galleries, interior design boutiques and all

manner of lifestyle shops.

Marketing or improvements to public space, how-

ever, are not the only way to address rising va-

cancy levels. Policy should also be developed for

a specific number of approach roads to shopping

areas. For instance, accessibility by car is essen-

tial for the success of approach roads. Optimis-

ing accessibility enhances the specific function of

these approach roads. Approach roads situated in

pedestrian zones are more easily transformed into

‘pedestrian zones’. In addition, it is also possible to

change the designated use of these roads by, for

instance, changing the designated use of a prop-

erty from retail to residential or to permit cars to

travel along their route. It is, however, not feasible

to transform all approach roads into appealing suc-

cesses or to change them into ‘pedestrian zones’. A

choice should be made in the designated use of the

approach roads (e.g. retail, residential, cultural or a

combination of these), depending on, for instance,

the location, traffic route, accessibility and available

parking.

How do you maintain the of these approach

roads?

As each city is distinctive and has a unique char-

acter, the same can be said of approach roads.

Therefore, the examples cited above cannot simply

be replicated in other cities, as an area does not

always lend itself to being shaped. This is particu-

larly true for ‘pedestrian zones’, which must already

have an ambience of their own and be residential

in nature. Conditions, however, can be created

that make it easier for an area or a road to attract

businesses/retailers. Figure 6 presents statements

which can serve as conditions to ensure the suc-

cess of approach roads.

Statements Approach roads

æ A ‘pedestrian zone’ arises organically. Although you cannot create them, you can establish precondi-

tions (e.g. pavement, ambience, designated use and traffic route).

æ Pleasant, moderately busy public space along an approach road can encourage consumers to let

down their hair and enhance the mood to buy.

æ Minimise distances between ‘source points’ (i.e. locations near city centres with ample parking and

popular shops) to the city centre..

æ Give careful thought to public space and traffic management along the road from the public transport

point/railway station to the city centre.

æ Develop policy for approach roads with vacancies (shopping area with ‘destination shops’, residential

area, cultural function, etc.).

Statements


In addition to these general statements, specific

conditions can be established for each stakehold-

er. The following preconditions apply to consum-

ers, the municipal authority and the retailer.

Consumers

Consumers often opt to shop in a city because it

offers something extra. In addition to the standard

retail chains, which consumers want to have, there

is also a need for ambience and for unique and

surprising shops. Consumers also increasingly find

information online and more frequently shop on the

internet as well. For consumers, it is essential to be

as well-informed as possible about the retail offer-

ings of a city’s approach roads.

Municipal authorities

Municipal authorities face the key task of main-

taining the public space and the functions of ap-

proach roads and ‘pedestrian zones’. The functions

established in an approach road depend on the

pavement, traffic route and available parking. The

range of shops present can be somewhat shaped

by changing the designated use to preferred road

functions. At the same time, the municipal authori-

ties gain a role in the marketing of areas, by, for

instance, including links on municipal websites to

information about the shops in certain roads and

neighbourhoods.

Retailers and new businesses

Retailers still require B and C retail locations of-

fered on some approach roads. The choice of a

certain location depends on the retailer’s function.

For art galleries, footfall and dwell time must be

high,,whilst the customers of dry cleaners are only

in the shop briefly. In addition, retailers/businesses

stand to gain if a specific location is marketed.

Investors

For investors, clarity about the policy the munici-

pal authority has developed in respect of the func-

tions in approach roads is essential. In addition, an

area’s appeal, which is often the result of active

management, can lead to rising rental flows. For

this reason, investors would gain by focusing on

these aspects. There is greater uncertainty about

investments in approach roads compared to invest-

ments in main high streets, but they do, however,

contribute to the liveliness of a city


Dawn of a sustainable revolution?

A growing number of major retailers are publicly

committing to sustainability objectives in their CSR

policy. At the same time, more sustainably pro-

duced, organic or environmentally friendly products

are available in the shops. There is general con-

sensus about the lasting importance of sustainabil-

ity and the idea that work has to be done to make it

happen. Meanwhile, the first sustainable retail de-

velopment projects in Europe have been delivered.

The government, however, has even more ambi-

tious aims in mind. By 2020, total greenhouse gas

emissions in the Netherlands must be reduced by

30% compared to 1990 emissions levels. This is

a substantial objective, and measures can signifi-

cantly impact every economic sector, including the

retail sector. Property cannot be disregarded as it

accounts for a large part of greenhouse gas emis-

sions from commercial activity. Is the retail property

market at the dawn of a major revolution in sustain-

ability?

Rise of sustainable retail property in Europe

The first ‘green’ retail development projects have

meanwhile been delivered. Major new shopping

centres have been completed in both Western and

Eastern Europe. The sustainability aspects applied

range from energy conservation measures to the

use of sustainable materials or to the promotion

of fair trade. Sustainability

features more prominently

on the agenda of retail de-

velopers and investors. For

years, European companies,

including Sonae Sierra and

British Land, have applied

their own standards for new

construction projects, while

Unibail-Rodamco, Klépierre,

Corio and Redevco have

publicly committed them-

selves to sustainability ob-

jectives. Most of the retail

development projects included in the BREEAM

Europe Retail 2008 list belong to Unibail-Rodamco

(BREEAM – November 2009).

Asset value development is the primary reason

why sustainability ranks so high on the agenda of

retail developers and investors. As sustainability

becomes more common in the property market,

sustainable development will help slow down the

process of economic and functional obsolescence

of a retail property or a retail complex. This will

positively impact asset value development. This is

particularly true when the government tightens reg-

ulations or when retailers’ demand for sustainable

retail property grows. For this reason, the question

for retail developers and investors is not whether

they should pursue sustainable development, but

rather to what degree of sustainability they should

strive to meet. Investments in sustainability con-

tinue to be made on the basis of a business case

approach, in which the ambition level is set against

the expected yield, operational costs and risks.

Developers and investors in Europe are not alone

in facing the cost-benefit challenge of a sustainable

business case, retailers are also confronted with

this problem. The UK is a good example. Although

there are sufficient major retailers who take sus-

tainability seriously in the UK, they face substantial

challenges in receiving a BREEAM ‘Excellent’ rat-

ing for prospective retail accommodation. Currently,

only two retail development projects (i.e. Cabot Cir-

cus shopping centre in Bristol and the retail accom-

modation of CostCo Warehouse in Croydon) have

succeeded in being awarded this rating (EG Retail

– November 2008).

The current state of the economy aside, it should

be said that the development of sustainable re-

tail property in the Netherlands is lagging behind

that in other European countries. Although the

Netherlands does have a mature retail market, it

Meydan

Shopping

Centre


remains a challenge – due to the unique structure

and conservation efforts in city centres – to develop

large-scale sustainable retail property. This can be

attributed to the following:

æ The Netherlands has the highest density of retail

space per resident in Europe. As opportunities

for the large-scale expansion of local stock of

retail space is and will remain limited, property

development focuses primarily on the redevel-

opment of this existing stock. Sustainability ac-

tivities must focus on the existing stock of retail

space..

æ Redevelopment activities will primarily involve

existing stock in the city centres. However, the

current situation involving small retail units,

shared ownership and conservation of historical

buildings limit the options to achieve a high level

of sustainability.

æ Compared to other European countries, retailers

and investors exchange data on turnover and

operational costs only to a very limited extent.

For this reason, an investor has little say on, for

instance, a retailer’s energy consumption.

æ High streets most commonly offer small, sepa-

rate retail units, which are generally delivered as

a shell to retailers. There is also no central man-

agement. The sustainability yield to be achieved

at retail-unit level is apparently negligible to the

retailer or owner.

Lack of a key driver

How will retailers perceive sustainable retail prop-

erty? Retailers have been keenly interested in both

CSR and sustainability for some time now. Con-

sumer awareness is growing by leaps and bounds

due to constant media attention. For this reason,

it is not surprising that the number of international

retailers which have developed CSR policy has

grown dramatically in recent years. In November

2008, ICSC Europe and Real Estate Publishers

jointly presented the results of a survey of 250 re-

tailers from 27 countries about their take on CSR

and sustainability. More than 66% expect consum-

ers to start selecting retailers based on their CSR

policy. About 40% indicated that they had already

implemented CSR policy. The survey also demon-

strated that major international retailers are more

actively involved with CSR than smaller retailers.

Sustainable retail property can significantly contrib-

ute to the sustainability objectives outlined in the

CSR policy of retailers, which range from lower

energy costs and CO2 emission reductions to the

use of environmentally friendly materials. In Eu-

rope, however, there is as yet little evidence that

sustainable development impact the rent or appeal

of a retail unit for a retailer. For the time being, retail

management will continue to focus on the current

state of the economy. Where one is struggling to

survive by generating sufficient levels of turnover,

the other is seizing opportunities to expand in well-

located retail units that have become available. This

is understandable given the cost and yield alloca-

tion. Rent for retail units makes up only a small part

of the total costs incurred by a retailer. Moreover,

the leased property is considered part of the over-

head paid to support the core business. For H&M,

rent as a percentage of turnover in 2008 amounted

to only 9% (see Figure 4).

The Meydan shopping centre in Istan-bul (Turkey) opened its doors in August 2007. The London firm FOA developed the complex which offers 70,000m2 GFA. The shopping centre includes such major international retailers as Nike, Mango and Turkey’s first branch of Media Markt. The shopping centre has since received vari-ous awards, including the Award for Ex-cellence (ULI Europe) and the Resource Award (ICSC Europe) for its achievements in sustainability. Various key basic princi-ples of sustainability were integrated into the design. Indoor temperature is regulated by means of the largest geothermal energy system in Europe and one of the largest green roofs in the world. Additional day-light enters through openings in the roof. Multiple land use is achieved by means of an underground car park, the presence of a central square and the use of the green roofs for major public events.


Figure 4:

Omzet Inc BTWBTW Omzet ex BTWKostprijs van v Bruto winst100% 85% 85% 52% 52%

15% 33%

0%10%20%30%40%50%60%70%80%90%

100%

Turnover incl. VAT

VAT Turnover excl.VAT

Cost-price of goods sold

Gross profit Overhead and taxes

Rent Net profit

Breakdown of turnover

at H&M

Source: H&M annual report (2008)

Although two-thirds of retailers expect consumers

to start distinguishing between retailers on the ba-

sis of their CSR policy, a key questions is the ex-

tent to which sustainable retail property will impact

consumer behaviour. As end users, consumers are

motivated primarily by personal need, available

budget and the range of products on offer. These

motivations also often take into account various

factors (e.g. brand, convenience, comfort, status,

safety, fashion, social desirability and sustainabil-

ity). As it is impossible to satisfy every factor at the

same time, consumers must weigh their choices.

As a result, sustainability does not automatically

influence consumer behaviour to a great extent

(source: Social and Economic Council of the Neth-

erlands). There must first be sufficient critical mass

in the supply of sustainably produced products and

an adequate sense of urgency among consumers

before the majority of consumers will deliberate

changing their buying behaviour. Moreover, this be-

haviour will more likely be based on the sustainable

aspects of the product to be purchased, including

biological degradability or environmentally friendly

production. Only then will the sustainable opera-

tions of the retailer be taken into consideration,

as part of which such issues as supporting a good

cause and social involvement will be priorities. In

that respect, the sustainable accommodation of re-

tailers is a less relevant aspect for consumers as it

is less tangible. It seems that consumers will for the

time being not serve as the key factor in promoting

sustainable retail property.

.

Laws and regulations, however, appear to be a key

driver for retailers to increase the sustainability of

their business operations and, consequently, their

accommodation. In December 2008, the European

Parliament approved an ambitious package of cli-

mate and energy measures which incorporated the

objectives for 2020 into practical policy. In Decem-

ber 2009, the UN Climate Change Conference will

be held in Copenhagen. The EU greenhouse gas

emissions reduction objective of 20% by 2020 will

be increased to 30% if other countries also decide

to implement measures to combat climate change.

Regardless of this agreement, the Dutch govern-

ment has committed to achieving a 30% reduction

in greenhouse gas emissions. For most commer-

cial activity, property accounts for 40% to 60% of

greenhouse gas emissions. Emissions levels are

even higher for retail property. Sustainable retail

property can make a significant contribution to the

reduction of total greenhouse gas emissions. This

can be a key aspect in achieving the CSR objec-

tives of retailers.


Redevelopment tasks with a view to sustaina-

bility

In the Netherlands, available stock of sustainable

retail property is low. This partly explains the lag-

ging demand for sustainable property among re-

tailers. Sustainability ranks high on the agenda of

retail developers and investors given its positive

impact on asset value development. Sustainability

also features in marketing and, for instance, the ac-

quisition of municipal development rights. One fea-

sible way to shape CSR policy is to assume social

responsibility from shopping areas, such as district

and neighbourhood shopping centres, for the im-

mediate surroundings. This can involve neighbour-

hood activities or support for clean-up initiatives of

the area or a school.

A relatively large number of shopping centres in the

Netherlands were built in 1960s and 1970s. Re-

development represents the greatest potential for

achieving sustainability in these complexes. Return

on investment will be accelerated by taking advan-

tage of economies of scale and having various re-

tail units share a single building, which is owned

by a single party. In addition, it is easier to achieve

greater yields in sustainability, including reductions

in heat loss. Despite this fact, the availability of

sustainable retail property in the Netherlands will

develop slowly in the short term. In addition to the

current state of the economy, the primary challenge

facing the Dutch retail property market is redevel-

opment with all the associated development risks.

In weighing the risks against the sustainability am-

bitions, retail developers have a strong tendency to

take small steps. In addition, investors in retail de-

velopments in the Netherlands generally have little

influence on the retailer and on how the sustainable

retail property will be used.

Dawn of a sustainable revolution?

There is as yet no unequivocal response to the

question of whether the retail property market is

at the dawn of a sustainable revolution. A clear

majority of retailers expect consumers to start

distinguishing between retailers on the basis of

their CSR policy. Various major retailers have al-

ready developed CSR policy with both short- and

long-term sustainability objectives. In addition to the

availability of sustainable products and sustainable

business operations, sustainable retail property

can make a significant contribution to achieving the

retailer’s sustainability objectives. The underlying

motivation, however, is not necessarily consumers,

whose buying behaviour will for the time being not

be swayed by sustainability aspects alone. Change

will more likely come in response to the sustain-

ability aspects of products than to the retailers’ CSR

objectives (e.g. sustainable retail accommodation).

The motive fuelling demand among retailers for

sustainable retail property is more likely laws and

regulations. EU regulations are becoming more

stringent and are increasingly affecting the com-

mercial operations of retailers and, consequently,

the demand for and use of retail property as well. In

the time to come, a clearer picture will arise of how

national governments will implement the objectives

and measures which they have agreed. Strict regu-

lations and enforcement could, for instance, give

rise to an extreme situation in which retailers are

forced to close open entrances, which would have

disastrous implications for the appeal and appear-

ance of high streets. As many stakeholders aim to

retain the position of shopping areas in city centres

(e.g. mega-shopping centres are still not an option)

means this situation is not likely to change anytime

soon. Nonetheless, sustainability is increasingly

becoming a key issue for all stakeholders and the

impact of this on high streets in the city centre will

become increasingly visible.

able retail propeerrty is morore likely llaaws and d

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t and arre e increasisinngly affececting thee com-

operatatiions of reretailers aand, conssequentltlyy,

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goverernments wwill implemement thhee objectivvees

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Conclusion

The Dutch retail market is currently feeling the im-

pact of the financial crisis. Despite a slowly recov-

ering economy and growing optimism, consumer

confidence and the willingness to buy are still low.

In addition, rising unemployment and waning buy-

ing power will negatively impact consumer expen-

ditures in the period to come. As a result, there has

been a sharp decline in retailers’ demand for retail

space. The impact of the recession has been felt

the most on the approach roads to the larger shop-

ping areas and the main high streets of small- and

medium-sized cities, resulting in falling rent values

and rising vacancy levels.

In addition to the economic impact, there are sever-

al other developments that are changing city-centre

high streets in the Netherlands. This Retail Market

Special has presented our vision about the impact

of three themes of relevance to the high streets: on-

line shopping, key selling points of approach roads

and sustainability.

Online shoppingWhile Dutch city centres continue to be the pri-

mary shopping areas, online shopping has made

substantial structural gains in recent years. Online

shopping offers consumers an attractive alterna-

tive to going to physical shops due in part to the

wide selection and the sheer number of suppliers,

the ability to compare information and the option

to shop 24 hours a day (compared to the limited

opening times of physical shops). Accordingly, on-

line shopping is expected to increase significantly

in the years to come, contributing to a shift from

spending in physical stores to spending online. As

a result, several retail sectors will retreat from the

high street. This will in turn lead to growing retail

accommodation vacancy levels, primarily in the ap-

proach roads to shopping areas.

Online shopping, however, also presents opportu-

nities for retailers with a physical shop. The Internet

offers international retailers more opportunities to

expand. An online shop, however, can also serve

as the springboard to a physical shop. In addition,

online shops and physical shops complement each

other in enhancing the brand experience and the

provision of information. Moreover, online shopping

is more convenient for consumers. The negative

impact of online shopping on several non-food re-

tail sectors (e.g. the clothing sector) will, however,

remain limited. For these sectors, online shops

actually present opportunities. The rise of online

shopping will increasingly promote the use of high

streets as a marketing tool, as a result of which

brands will become far more discerning about their

choice of location. This increasing focus on brand

positioning and branding will increase brand diver-

sity on the high street, but the range of shops on

offer will become even more monotonous.

Approach roads into shopping areas

The impact of the recession is being felt the most

on the approach roads to the larger shopping ar-

eas and the main high streets of small- and medi-

um-sized cities. The approach roads to shopping

areas in the major cities no longer enjoy the advan-

tage of lack of available retail space, as these are

precisely the locations where vacancy levels have

arisen. The vacancy levels lead to lower rent values

and in time to a decreased rate of penetration of

the shopping area. For this reason, it is essential

for stakeholders to focus on retaining the appeal

and unique selling points these approach roads can

offer a shopping area.

Branding and marketing of the approach roads to

a shopping area can maximise the response to the

interests of consumers and changing consumer


trends. Several websites already present informa-

tion about the range of shops on approach roads

to the shopping areas in various cities. To this end,

both municipal authorities and retailers/investors

should work as much as possible to reach consum-

ers as effectively as possible. In addition, the quality

of public space and the residential environment are

essential for branches of successful retailers and

as a means of attracting consumers. In addition,

targeted and selective municipal policy is essential.

This should take into consideration such aspects as

location, traffic route, accessibility and availability of

parking as the basis for the designated use and the

mix of functionality. Retailers then face the task of

assessing whether their product also fits the loca-

tion. By means of the active management of retail

property in the approach roads to shopping areas,

investors can enhance the appeal of the shopping

area. An attractive shopping area increases the

certainty of cash flow.

Sustainability

The Netherlands is lagging behind the rest of Eu-

rope in terms of sustainable developments in the

retail market. In the Netherlands, sustainable retail

property primarily involves redevelopment. There is

no evidence of a retail market revolution, despite

the fact the commercial operations of retailers is

likely to dramatically change. Although a growing

number of consumers recognise the importance of

sustainability, this is not yet apparent in consumer

trends. Consumers focus more on the sustainability

aspects of products than on the sustainable accom-

modation policy of retailers. Therefore, consumers

currently do not serve as the key factor in promot-

ing sustainable retail property. The primary driver

behind developments in sustainable retail property

comes in the form of laws and regulations. Sustain-

able retail property can significantly contribute to

reducing greenhouse gas emissions and to achiev-

ing the sustainability objectives outlined in the CSR

policy of retailers.

When sustainability becomes commonplace, sus-

tainable development will help slow the process

of economic and functional obsolescence of retail

property. This will positively impact asset value de-

velopment. Developers and investors will increas-

ingly offer sustainable retail property. In the medium

term, opportunities will primarily involve sustainable

retail space at attractive and convenient locations

with sufficient passers-by.

Conclusion

The high street is undergoing a transformation. Our

conclusion is that this change presents opportuni-

ties for investors, developers and retailers. In the

short term, however, the retail market is under pres-

sure from a sluggish economic recovery. Although

the worst of the contraction is over, stabilisation

of retail sector turnover will occur no earlier than

2010. However, as a number of retailers will be

compelled to find new retail space or close under-

performing branches, new retail units will become

available in the high streets at prices in line with the

market and generally without an acquisition price.

This presents opportunities for other retailers who

want to expand or to trade up and who can move to

a better location for the same amount of rent. This

dynamic process will also change the high street,

but then again change stimulates consumers. Our

expectation is, provided that investors, develop-

ers and retailers seize the resulting opportunities,

Dutch high streets will retain their lively character.

November 2009

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Amsterdam

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netherlands - dutch retail market special 2009 eng

Documents

retail property market

retail sectors

retail market special

retail market special

impact of online shopping

high street figure

rise of online shopping

range of retail market