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Monday, 13 January 2014

Shop vacancy in The Netherlands rises for the seventh year in a row, hitting almost 7% of total shops. According to Ronald van Zetten, CEO of the HEMA retail group, this is caused by excess shopping space.

Although there are some cautious signs that the Dutch economy has started to recover slowly, 2013 has not yet been a good year for the retail industry.

According to the Dutch research bureau Locatus, the vacancy of retail stores has grown to 6.9% in 2013 from 6.4% in 2012. Measured in square meters, the vacancy number even rose to 7.3%. In 2013, it was for the seventh year in a row that the Dutch store vacancy rose.

Here are the pertinent snips from the press release by Locatus.

The annual trend analysis of research bureau Locatus shows, that the vacancy in the number of brick-and-mortar stores rose to 6.9% in 2013 from 6.4% in 2012. Regional differences are large. 

Defaulting and quitting retailers of fashion are responsible for delivering the largest number of vacant stores, but this group of retailers also fills up the most stores again. As it turned out to be, 2013 has become the first year in this century that the growth in square meters of shopping space came to a halt.

Last year, the total shop vacancy rose by 1,000 stores to over 15,000 vacant stores – a vacancy rate of 6.9%. With 7.3% the percentage of vacant square meters is even higher.

Vacancy differs strongly in The Netherlands. The three regions with the highest vacancy rate are South-Limburg (11,4%), Delfzijl and surroundings (10,9%) and East-Groningen (10,1%). In comparison, the greater Amsterdam region only has a vacancy rate of 3.9%.

From our analysis it became clear that most vacancy is relatively short-lived. Of all vacant stores, 44% is vacant less than one year and 34% less than three years. Eventually, only 22% of the vacant stores is vacant for longer than three years.

What stands out is that the percentage of stores, which has been vacant for more than one year, is not increasing, but – to the contrary – is decreasing slightly. For 5,665 of the more than 14,000 vacant stores per 1 January 2013, a new tenant has been found.

In combination with the press release, Locatus presented a table with the latest vacancy data for all provinces in The Netherlands. I adapted this table to my familiar look-and-feel:

The shop vacancy per Dutch province
Data courtesy of Locatus
Click to enlarge
It seems that the development of additional square meters of shopping space has finally come to an end (first red and bold text) in 2013.

Finally, cities and municipalities and also the large project developers and operators of shopping space grew some common sense and found out that ‘enough was enough’, when it came to shopping space in The Netherlands.

During the last decade, there have been six important factors for the retail industry:
  • The soaring costs for car parking in the cities and villages, which turned fun shopping into an expensive pleasure;
  • The unstoppable development of the online sales channels in The Netherlands;
  • The aging population, which diminished the need for shops, as older people buy and consume less goods than younger people.
  • The soaring shopping space, as a consequence of the mindless building frenzy that had so many city centres in its grasp, and the overkill in stores that was the result of this frenzy;
  • The piranha behaviour of the large retail chains, which has first eaten away the necessary margins for the independent shopowners and subsequently for the franchise holders of these large chains themselves;
  • The increased austerity among the Dutch citizens since 2008, as a consequence of the economic crisis.

These first three factors have diminished the numbers of visitors and fun shoppers at shopping malls. 

At the same time, the last three factors have eroded the margins for the shopowners so much, that many shopowners perished during their struggle for survival. Many other shopowners are currently clinging on to life by the skin of their teeth.

The municipal greed and the structural exaggeration of sales opportunities and growth prognoses, maintained by the large shopping space operators, have dealt blow after blow to the poor (independent) shopowners. These people often invested their life-savings and – on top of that – high bank loans and credit lines into their shops, only to battle for survival each year.

While Locatus states that “only” 22% of the vacant shops is vacant for more than three years (second red and bold text), I read in these data that 56% of the vacant stores is vacant for at least one year. Of course, this is a matter of interpretation.

Nevertheless, you must realize that every vacant store in a shopping mall is a “scar”: it reduces the attractiveness of the other stores in this shopping mall. 
When such a shopping mall has a relatively high vacancy rate, the rest of the stores – still in operation – is in deep trouble, as their attractiveness and consequently the number of visitors have also strongly reduced.

Besides that, high store vacancy in a shopping mall can easily lead to pauperization, vandalism and crime at the shopping mall; especially as such a shopping mall is already located in a challenged neighbourhood. Therefore it is very important not to underestimate the effects of long-term vacancy among shopping malls and shopping areas.

In the eyes of Ronald van Zetten, the CEO of the large Dutch retail formula HEMA, the biggest problems in the retail industry have been caused by excess shopping space. The following snips come from Het Financieele Dagblad:

The Netherlands has excess square meters of shopping space. This excess shopping space has emerged, due to the fact that a great number of stores has been built in the years before the crisis, while the population density has decreased at the same time. This is the opinion of HEMA CEO, Ronald van Zetten.

Ronald van Zetten - CEO HEMA retail group
Picture copyright of: Ernst Labruyère
Click to enlarge
Van Zetten dislikes very much the notion that municipalities are still developing new shopping malls currently. 

As an example he calls Doemere in Almere-Buiten [my domicile – EL] “That is a bad idea, to put a new shopping mall outside the centre, as there is already much store vacancy in the city centre itself. Besides that, not every neighbourhood needs a shopping centre. It is already hard enough for the other shopowners without this competition”.

Vacant stores in shopping mall Doemere / Noordeinde
in Almere Buiten
Picture copyright of: Ernst Labruyère
Click to enlarge
In this situation, HEMA's CEO Ronald van Zetten had the right ta-ta, but the wrong ho-ho:
  • First, Almere-Buiten is not just a neighbourhood, but almost a separate city of 50,000 inhabitants within the city area of Almere. For the residents of Almere-Buiten, the shopping centres of Almere are quite far away;
  • Second, the shopping mall Doemere/Noordeinde in Almere-Buiten is not a new shopping mall, as it has existed for 20-odd years already.
    • What is true, however, is that Doemere / Noordeinde has been going through an enormous refurbishing operation during the last seven years, in which many new shops have been built.

Van Zetten is right, that the aforementioned refurbishing operation of Doemere / Noordeinde has been too much, especially as it was a trigger for paid parking in Almere Buiten.

Vacant stores in shopping mall Doemere / Noordeinde
in Almere Buiten
Picture copyright of: Ernst Labruyère
Click to enlarge
Before this refurbishing operation, Doemere / Noordeinde had been a cozy shopping mall where parking was free; afterwards it became an expensive (parking), uncozy and windy concrete jungle, where funshopping is not really funny anymore. It is something that I regret every day.

Vacant stores in shopping mall Doemere / Noordeinde
in Almere Buiten
Picture copyright of: Ernst Labruyère
Click to enlarge
Summarizing: in spite of the small greenshoots in the Dutch economy, the retail industry is still in deep trouble, due to a number of factors:
  • A less dense population;
  • An overkill in shopping space;
  • The increased austerity among the Dutch population;
  • The quick development of the online channels;
  • The piranha behaviour of the large retail chains.

Even if the economy starts to grow rapidly from today, it will still take at least three years to normalize the situation for the retail industry, in my humble opinion.

And this only under the premise, that cities and municipalities will stop with building extra shopping space. 2014 will be the year of stabilization in the retail industry, but it will definitely not be the year of the big recovery.

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