Codic opens Royal-Hamilius in Luxembourg City this year. One of its anchor tenants is Galeries Lafayette. Image: Foster + Partners & Tetra Kayser
Studies & Reports

Market movements in Luxembourg

There will be two new retail properties in the Grand Duchy, as Cloche d’Or and Royal-Hamilius will be opening there this year.

The Grand Duchy’s economic key data is looking very promising: Luxembourg’s resilient domestic demand offset the drag from slowing global trade. GDP growth posted a strong 3.6% last year and is expected to reach 4% in 2019. Employment growth remains robust, while the unemployment rate continues to decrease for the fifth consecutive year to reach 5% at the end of 2018. Monetary policy normalization is expected to be very gradual given the concerns of the ECB to prevent shocks and should result in a strong confidence on the real estate markets in this year.

But how about the Grand Duchy’s retail real estate market? Despite a very low fourth quarter, the retail take-up reached more than 32,000 sq m in January 2018, the second-best year since 2010. The 2,055 sq m letting of Maisons du Monde in the shopping center Belle Etoile in Luxemburg-Stadt is one of the biggest transaction year-to-date. The opening of the extension of City Concorde in Betrange in November also contributed to this important take-up with 6,200 sq m and 18 transactions, according to the “Luxembourg Retail Market Snapshot, Fourth Quarter 2018” by Cushman & Wakefield.

2019 will be year of substantial openings. Cloche d’Or, for example, with its 140 stores in Luxembourg City, which have a strong impact on the country’s retail landscape. Ceetrus is responsible for this project. Royal-Hamilius will also open this year: Following an international competition, the City of Luxembourg chose Codic for redeveloping the Royal-Hamilius block into a modern, eco-responsible, with plenty of room for public spaces, easily accessible multifunctional location. The project is designed by Foster + Partners associated with Tetra Kayser. Added to residential and offices spaces, a Galeries Lafayette store will contribute to the shopping experience. Fnac will deliver a cultural and Hi-Tech commercial offer. The Delhaize Premium convenience store concept will fulfil daily needs and the Peruvian Star Chef Gaston Acurio will operate the roof top restaurant.

Stable rents

According to Cushman & Wakefield’s report, rents are stable compared to the previous quarter, at 180€/sq m/month in the Grand’Rue, around 115€/sq m/month in the prime shopping centers and at 23€/sq m/month for prime out-of-town locations. The purchase of the Grand’Rue 83 by GLL for €85m in the fourth quarter was the second transaction of 2018, after the €11m purchase of the Rituals in the Grand Rue 53 by a private investor. Appetite remains strong through few opportunities currently exist in the market.

The retail sector should benefit from the strong macroeconomic fundamentals, though the growing importance of online retail and the difficulties of the city center put retailers under pressure on the letting market. New important retail schemes will boost activity in the coming months. On the investment side, however, only few opportunities exist.

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