Solid returns with Dutch Retail

Collin Boelhouwer, head of Asset Management Retail for Bouwinvest: “It’s all about the retail experience and that’s what Bouwinvest is focusing on. You have to create an attractive environment where there’s more to do than just buying clothes, which can just as easily be bought online. The consumer wants to go to places where there are new shops and places to eat as well as do other things that heighten the overall experience.

What we’re seeing is that this is happening more in the big cities and especially in the best shopping streets. Our latest acquisition, at the end of last year, was the World Trade Centre in Rotterdam that has a retail capacity of 8,100 square metres and fits seamlessly into our investment strategy.”The other main strand of Bouwinvest’s investment strategy is geared to grocery shopping in convenience retail centres.

Boelhouwer said retail trends are reverting to what they were more than 20 years ago: “In that era there tended to be an anchor supermarket with a few other smaller shops such as the baker and the butcher around it. The market then changed due to demand and rising levels of disposable income. Fashion shops and other types of smaller retail offerings sprang up in the same places. At the turn of the last century, these types of shopping centres started to grow but then, with the competition from online shopping, those stores that weren’t offering groceries started to get into difficulties and couldn’t generate enough turnover. That resulted in empty shops and these couldn’t be filled with a second baker or a third butcher. Eventually it will become more interesting for these spaces to be developed as housing or healthcare providers. If there’s nothing more that you can do, then you have to take your distance. We now make sure that when we build new shopping centres, they’re smaller than what was previously the norm.”

For those projects that aren’t in prime locations, then it’s tenants that have the last word: “Retailers want to be in the best possible place with the lowest overheads. As long as there’s enough demand, then landlords will tend to compete against each other to offer the best service. Investors would prefer to offer a shop at a lower rent than have it standing empty. If you have one area that is seen to be filled with busy shops, this then makes those places with empty premises look even less appealing.”

Sometimes price alone isn’t enough of an incentive. Creative thinking is often required. A good example of which is what’s been happening with the Makado shopping centre in Purmerend. Bouwinvest is busy working on a project with local retailers that’s not just about the physical space but also about creating an online sales point.

“We’ve taken the initiative to join forces with 25 tenants and by sharing the costs of developing a special app, we’ve been able to provide digital access for a large number of shops. With this type of initiative you can give entrepreneurs something extra to offer. It all comes down to trying to entice the retailer. That’s not just dependent on the rent, or the location, but also on the additional market possibilities you’re offering,” Boelhouwer said.

“It’s just good business practice to ensure that our properties continue to look attractive and are maintained in good condition,” he added. “Sometimes we have to guarantee that the rent won’t rise for years to come and that means we have to do more with the same amount of money, be more enterprising, and react quicker to the changing demands of the market. In the Netherlands, there are a lot of places that are in need of a facelift. Fortunately, Bouwinvest has the capabilities and the capital to help.”

Bouwinvest’s main focus will be on the Amsterdam retail market for the foreseeable future, not only on the city’s main shopping district but also in local neighbourhoods such as Stadionplein in the south and in the north where the company is investing in the development of the Mosveld shopping centre. Future trends in real estate demand are closely monitored: “Developers are always looking to push the boundaries of what is possible, whilst the investors are more cautious in their approach. We don’t want to build just so that premises remain empty. Real estate is only as flexible as the changes in demand allow. You can’t take bricks away. At the end of the day, empty premises will be converted into housing or given another function. But these changes take time. It’s better to have less real estate that is in high demand than a lot of real estate that you don’t know what to do with. What we’re seeing is that investors are now more inclined to take the lead than a few years ago. These days, a development only gets the go ahead if it’s certain it’ll be sold. Despite the smaller market, it’s still possible to make good returns, but only if you’re very selective in what you do,” Boelhouwer concluded.