netherlands - dutch retail market special 2009 eng
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Netherlands - Dutch Retail Market Special 2009 ENGjTRANSCRIPT
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
Advance • Retail Market Special • Transformation of the high street • 4
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
5 • Advance • Retail Market Special • Transformation of the high street
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
Advance • Retail Market Special • Transformation of the high street • 6
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
7 • Advance • Retail Market Special • Transformation of the high street
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
Advance • Retail Market Special • Transformation of the high street • 8
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.
9 • Advance • Retail Market Special • Transformation of the high street
Advance • Retail Market Special • Transformation of the high street • 10
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
11 • Advance • Retail Market Special • Transformation of the high street
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
Advance • Retail Market Special • Transformation of the high street • 12
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
13 • Advance • Retail Market Special • Transformation of the high street
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
Advance • Retail Market Special • Transformation of the high street • 14
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
15 • Advance • Retail Market Special • Transformation of the high street
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.
Advance • Retail Market Special • Transformation of the high street • 16
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.
17 • Advance • Retail Market Special • Transformation of the high street
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
ons. EU regugulations aare becocoming mmoore
t and arre e increasisinngly affececting thee com-
operatatiions of reretailers aand, conssequentltlyy,
andnd for and u use of reetatail propeertrty as wweell. In
to comee, a cleareerr picture wwill arisese of how w
goverernments wwill implemement thhee objectivvees
assuures whichch they haavve agreeeed. Stricctt regu-
and enfoforcement t could,, ffor instaannce, give e
an extxtreme sitituuation iinn which rretailers aare
o cclose oppeen entraannces, whhiich woulldd have
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highgh streetss. As mannyy stakehhooololololoo dedeededd rsrsrsrsss aaaaimimimim ttto oo
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ng a k key issuee for all ssttakehoollddddlllll ererererrrrss ssss anananananand ddd d dd thththththhe e e e
oof f tthis on hihighghghghh s sssssstrtreeeeee tsts i ii in n n thththttheeeee e cciiiicicciicicicitytytytytytytytytytytytytytyytytyyyyy cccccccc cccccccccc cccenennenenneneneneneneenenenenenenenenenenenenttrtrtrtrtrtrttrtrtrtrtrtrtrtrtrtrttrtrtrrt eeeeeeeeeeeeee eee e wwwwiwiwiwiwiwiwiwiwiwwiwiwwiwiwiwiwwillllllllllllllllllllllllll
increasasininnglglglyy y ivivissiblblee..
Advance • Retail Market Special • Transformation of the high street • 18
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
19 • Advance • Retail Market Special • Transformation of the high street
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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