VIEWPOINT

Retail and retail property market in The

Netherlands

A DIFFERENT VIEW ON THE

DUTCH RETAIL MARKET
2015 was another year of turmoil for the Dutch retail market. Many retailers, mostly in
the middle segment, went bankrupt. However, also the seeds of improvement have been
laid in 2015. With a record high investment volume retail investors have already
anticipated on improvement. Retail vacancy has even declined in 2015. In this Viewpoint
we will zoom in on the developments in the occupier market and we will highlight the
trends and more positive expectations ahead in 2016.

The negative part of the story is widely known: many Dutch retail chains went bankrupt
in 2015. Many of these retail chains, such as V&D, Miss Etam, Schoenenreus and
Manfield, have dominated the main shopping area of the Dutch cities for decades.
Striking is that some of the largest retail chains (V&D and retailers of the Macintosh
Group) went bankrupt on the brink of 2016. At first glance the timing seems odd,
because many economic indicators were positive again: consumer spending has
increased by 1.3% in 2015 (y-on-y) and consumer confidence has reached the highest
level in eight years in Q4 2015. The Dutch employment has increased while the number
of bankrupt companies has declined in 2015. However, it should be noted that the retail
market is usually responding delayed on economic recovery, on average a year or one
year and a half later. Indeed, when the crisis reached the Netherlands in 2008, the retail
market was flourishing and showed a lively letting market and rising take-up volumes.

Another striking fact is that most bankrupt retailers are shoe brands. Apart from
changing consumer spending (a topic which we will discuss below), the impact of the
fact that H&M and fashion peers Inditex and Primark have started to sell shoes in their
own stores at a very reasonable value for money proposition, should not be
underestimated. Furthermore, the economic crisis has lasted a long time and many of
these bankrupt retailers had eventually consumed their last reserves.

Clear identity
Even so, one is still wondering: why were these retailers not able to survive? Well, first of
all these retailers were players in the middle segment within, however, a strongly
polarising market. While luxury and discount were increasing their market share rapidly,
many retailers in the middle segment failed to reinvent themselves. As a result they were
lacking a clear identity and consumers were not able to recognise their profile.

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Consumer spending
Changed consumer spending has also played an important role. The disposable income
of the Dutch has not increased during the years of the crisis, yet the level of fixed charges
(mortgage/rent, water, electricity, insurances, etc.) has remained unaltered. Some costs
have even increased in the last few years: today Dutch consumers are online almost 24/7.
80% of the Dutch population possessed a smartphone in 2015, against 45% in 2011.
About 65% owned a tablet in 2015, against 14% in 2011. By contrast, fewer consumers
owned a desktop in 2015 than in 2011. This proves the increased importance for
consumers of being online on the go. As such, when a large part of the budget is spent
on fixed charges and expensive mobile devices (and services/accessories related to the
use of these devices such as internet subscriptions), there is less money to spend on
other necessities. Because consumers can only spend their money once, they rather
choose for brands that offer both affordable and fashionable clothing and shoes. This is
also explaining the success of retailers such as Primark and H&M.

Polarisation
As such, CBRE also sees polarisation in the choices of consumers, consumers are no
longer ashamed to buy discount products. Consumers are buying high-end devices,
Michael Kors handbags and cheap T-shirts. Consumers are also increasingly spending
more money on for instance healthy food, which explains the strong expansion of
organic supermarkets (like Marqt) in the last few years. Also many juice bars, coffee bars
and vitamin stores have popped up, which also indicates a changing spending pattern.
Research of Gfk (November 2015) has indicated that consumers are expecting to spend
14% less money on fashion and shoes in the near future.

Summarizing: a lack of a distinct profile and changing consumer behaviour have played
a very important part. Some retailers are blaming their bankruptcy on the strong
competition of e-commerce and on the weather (sales volumes of winter clothing were
low due to a warm winter). Obviously, however, e-commerce and the weather are not the
only factors to blame.

E-commerce
Speaking of e-commerce: the sector is indeed witnessing increasing turnover figures of
17% growth last year. Nonetheless, we believe strongly in physical stores. Consumers will
always need and will always look for physical stores. Consumers desire experience and
excellent service. Retailers can offer this in a physical store. As such, it is not a surprise
that pure players such as Cool Blue and Neckermann are also actively opening physical
stores.

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TRENDS IN 2016

Convenience
Looking forward to 2016, there are a few important trends. One of the keywords in 2016
will be convenience. More initiatives on the field of home delivery (HelloFresh, etc.) will
pop up in 2016, which will link up with both convenience and the growing importance of
healthy product/healthy living. Speaking of this, also fast food chains will invest in the
quality of their food. Fast food chains such as McDonalds are currently studying on
improvement of their current offer.

Fan base
Today, retailers should be active and present on social media. Having a fan base is
crucial. It is advised that retailers should actively create a relationship with their
customers, create a community. In order to let consumers identify themselves with the
target group. Social media are an excellent means for retailers to make contact with
consumers.

Internationalisation
The trend of internationalisation is apparent for already many years in the Netherlands.
However, it has become even more important today. The new retailers are filling the
units in the high streets which have been left by bankrupt retailers. They are reshaping
the Dutch landscape. Often the arrival of a prominent foreign retailer is resulting in
redevelopment, in an upgrade of an outdated shopping location and even in increasing
footfall.

Table 1: New entries in the Netherlands in 2015

Retailer Sector Retailer Sector

Boggi Milano Luxury and Business Michal Negrin Luxury and Business
Bolia Luxury and Business Rabeanco Luxury and Business
FOL Gourmet Popcorn Food Rapha Specialist Clothing
Genome cosmetics Cosmetics Raumfeld Luxury and Business
Hackett Luxury and Business Rimowa Travel goods
Hanro Specialist Clothing Sandro Luxury and Business
Jamie's Italian Coffee & Restaurants Snipes Sports goods
LolaLiza Mid Range Fashion TK Maxx Value and Denim
Maje Luxury and Business

Source: CBRE, VTIS, 2016.

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Scaling-up & consolidation

The trend of scaling-up and consolidation. This business concept has worked out well
for retailers such as H&M. These retailers are able to anticipate rapidly on trends and
renew collections rapidly as well, because the stages of production and
selling and every stage in-between are being managed by themselves. Often such retailers
are also carrying multiple brands which enables them to target different consumer
groups.

Experience
Last but not least, we would like to mention the trend of experience. Since consumers
desire to be entertained and surprised, retailers should respond to this desire.
Experience could include innovative presentation of products, tasting and testing
products inside the store, ordering a product which is not in stock online within the
store and punctual delivery at home. Experience implies that retailers should reinvent
themselves more often, in order to surprise their customer. Extended opening hours
could contribute to experience as well. In the city centre of Amsterdam an experiment
with free opening for all retailers will start in the spring of 2016. The blurring of
branches will increase, which is also related to the trend of experience. Several cities are
currently experimenting with free zones: locations were food & beverage within a retail
unit will be permitted.

HANDLES FOR OWNERS AND MIDDLE SEGMENT RETAILERS

Having said this: which are the implications of these trends for retail owners and their
assets? Regarding high streets we expect that the best spot in the city centre will remain
the best spot. The compact city - making the main shopping area and shopping route
compact and clear - is a well functioning concept in the Netherlands. Supported by food
& beverage and leisure, high streets will remain capable of meeting the consumers
desire for experience. Thanks to the ongoing trend of internationalisation, the high
streets will also be able to offer a broad variety of shops and thanks to continuing
demand from international retailers the rental price level will remain stable, in our
opinion.

Also shopping centres owners should respond to the aforementioned trends. Owners of
shopping centres focusing on daily goods should make sure that the RUN function of
their shopping centre is embedded in convenience, discount and full service.

Shopping centres characterized by co-ownership: collaboration of the owners is a really

urgent matter. In the Netherlands shopping centres with shared ownership are often
urban district shopping centres, such as SC Buikslotermeerplein in Amsterdam,
Dukenburg in Nijmegen and Paddepoel in Groningen.

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The owners should choose a clear profile for their shopping centre, a clear proposition
towards consumers. They should also link up with the trends mentioned above, in order
to prevent a further decline of the value of their asset. Service and convenience as well as
accessibility and preferably free parking is of major importance.

Particularly retailers in the middle segment should meet the needs of consumers.
Examples of successful middle segment retailers are - at local level - Hutspot
(Amsterdam, Utrecht) and - at national level - Open32, Sissy Boy and Men at Work. The
parent company of these retailers is able to combine forces on back-office and costs, as
well as on purchasing. As a result these companies are operating in the same way as large
international players such as Inditex, Primark and H&M.

Expectations
We expect that the middle segment will recover eventually, provided that retailers will
focus on the trends outlined above. Moreover, since the world of retail will remain
dynamic and unpredictable, retailers should also anticipate on future trends.

To conclude, both retailers and investors should be aware of the fact that the seven-year
retail cycle has become much shorter. This will have a profound impact on both
investments and depreciations.

Contact CBRE Netherlands

Retail Research and Consulting

Krijn Taconis Marc van Tilburg
Executive Director Director
krijn.taconis@cbre.com marc.vantilburg@cbre.com
Telephone: +31 (0)20 626 26 91 Telephone: +31 (0)20 626 26 91

Ratih Bach
Senior Analyst
ratih.bach@cbre.com
Telephone: +31 (0)20 626 26 91

Disclaimer: Information herein has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and
make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. This information
is designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission of CBRE.

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