Post on 15-Jan-2016
The Nordic Retail Market
Anna K Johansson
14 April 2011
2
Introduction
Life before and after 2008 Key Economic Indicators Consumer Attitudes Retail Sales Retail Rental Performance
High Streets Shopping Centres
Trends – the fight for the Consumer Polarisation
Retailers Locations
Opportunities Rents & Deals Voids Attracting New Retailers Challenges for the Future
3
Life before and after 2008
Not a uniform picture across the Nordics Norway was not hit as hard as other Nordic countries by the
recession The domestic consumption and the production of goods and services
were fairly stable The increase of the unemployment rate was the smallest of all Nordic
countries
Denmark fairly stable performance during the recession but GDP decreased with some 5% in 2009 Housing market more hit than in other Nordic countries
Sweden and Finland Rapid fall in GDP and fall in production of goods Unemployment increase
All Nordic countries have performed well in comparison with many other countries in Europe
4
Key Economic Indicators: GDP Growth
As a result of a strong policy response by the Danish government, GDP was expected to grow at about 1.9% in 2010 and increase to 2.1% in 2011. GDP set for relatively slow but steady growth
Recovery set to continue in Finland, although at a steady pace
Norwegian (mainland) growth recovery is accelerating. Some of the best growth prospects in Europe for 2011
Slowing but still strong growth in Sweden
-10
-8
-6
-4
-2
0
2
4
6
2008 2009 2010F 2011F 2012F
EU DK N FI SE
5
Key Economic Indicators: Unemployment (%) Unemployment rate in the
Nordics below the EU average except in 2009 to varying degrees
Compared to EU unemployment lowest in Denmark and Norway. Generally decreasing mostly. Increasing slightly in Denmark
Unemployment could still rise further. In Denmark many companies avoid hiring due to moderate economic expansion and uncertainty from the Eurozone debt crisis
Unemployment is likely to stabilise in Finland
Strong labour market recovery being seen in Norway
Unemployment now starting to fall in Sweden
0
2
4
6
8
10
12
2008 2009 2010F 2011F 2012F
EU DK N FI SE
6
Key Economic Indicators: Inflation (%)
Inflation more recently above the EU average
Recent rises in Denmark primarily driven by increase in prices of tobacco, petrol and other consumer products. Inflation expected to stabilise in 2011
Modest increases in Finland over the next few years
Likely to remain stable in Norway
Small increases possible in Sweden but will be kept in check by the Swedish central bank
-2
-1
0
1
2
3
4
5
2008 2009 2010F 2011F 2012F
EU DK N FI SE
7
Key Economic Indicators: Consumer Spending Consumer spending in
Denmark increased by 2% in November; however, confidence has drastically declined among Danish consumers as they appraise the current economic climate
Consumer spending in Finland continues to grow
Norwegian GDP growth is expected to be helped by rising household spending and increased investments in oil
A large driver behind the growth in Swedish GDP is high domestic demand, this trend has been reflected in retail sales volume growth
-6
-4
-2
0
2
4
6
8
2008 2009 2010F 2011F 2012F
EU DK N FI SE
8
Changing Consumer Attitudes
Pre-Recession Consumer
I deserve it
I must have it
I will buy it
Post-Recession Consumer
I really shouldn’t
Do I really need this?
I will think about it
Source: Verdict Research
9
Retail Trade Turnover - % Change on Previous Quarter
Source: European Commission
-4
-3
-2
-1
0
1
2
3
4
5
2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4
European Union (27 countries) Denmark Finland Sweden Norway
10
High Street Shops – Rental Growth by Country
80
85
90
95
100
105
110
115
120
125
130
Inde
x 10
0=20
05
Denmark Finland Norway Sweden Europe Western Europe
Source: Cushman & Wakefield European Research Group
11
Shopping Centres – Rental Growth by Country
80
90
100
110
120
130
140
Inde
x 10
0=20
05
Denmark Finland Norway Sweden Europe Western Europe
Source: Cushman & Wakefield European Research Group
12
Trends – The Fight for the Customer
Greater polarisation between retailers Winners
Retailers still expanding, although cautiously and selectively
Greater polarisation between locations and types of locations
13
Retailer Status
Retailers: Many retailers saturated in their home market No significant “no wave” of multiple site retailers Not all dead – many willing to expand although cautiously
Active Retailers: Value Mainstream Fashionable New entrants New format
14
Polarisation of Locations
Location – the dominant are getting stronger Downtown shopping streets e.g. Copenhagen city centre Affluent suburbs and towns Regional cities with dominant shopping centres
Smaller towns and first generation shopping centres Suffering Limited demand Lack of attention and investment
Opportunities nevertheless
15
Opportunities
Supply vs demand – little pipeline Satisfying demands of retailers’ expansion plans
More concentration on proactive asset management of existing space
Refresh tired schemes to keep them fresh and of interest to tenants and consumers
Differentiation between prime and secondary Prime cities driven by demand Town centres and shopping centres:
Realisation of drop in values - its happening! Rejuvenation - landlords/investors are the catalyst Lack of true asset management expertise
16
Shopping Centre Supply
Denmark
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sq.m
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sq.m
0
50,000
100,000
150,000
200,000
250,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sq.m
Finland
Norway
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sq.m
Sweden
17
Rents and Deals
Number of deals decreased…. Still growth Predictions:
2011 – rents are likely to remain stable with a slight upward pressure across the Nordics
Locations likely to recover quickest Prime location streets Up to date shopping centres
Deal structure changing Turnover based rents increasing, sometimes including minimum rent Lease incentives from the landlords
18
Voids – What can be done?
Assist retailers: Landlords need to re-connect with building retail
entrepreneurs and new entrants Supporting independents and small chains
Positive asset management Lease incentives by the landlords Think laterally about new initiatives to lease the
vacant space using examples from elsewhere in Europe
19
Attracting New Retailers to the Nordics
New retailers can also be home-grown Number of retailers considering entrance to the Nordics. Many attractions to international retailers:
High income and spending power Brand conscious and oriented consumers Market focused in a small number of cities
BUT they are also relatively small markets individually Even taken together the total market size is only 25 million and the10th
largest in Europe though in terms of area the Nordic market covers 1.155sq.km (making it the
2nd largest area (sq.km) in Europe excluding Greenland) ahead of Turkey
20
Nordics - An Opinion on the Year Ahead
A healthier outlook for the global economy will boost the prospects for Nordic exports in the coming months, although the unemployment situation in the region is not expected to improve until 2011
The Nordic countries are relatively better placed in terms of public finances, whereby governments can undertake fiscal stimulus without significant new debt, allowing a more gradual fiscal tightening once the economic recovery kicks in. Finland aside, the weaker level of local currencies will be beneficial to the recovery
Low interest rates are supporting business and consumer confidence/activity
The region’s banks are also heavily exposed to the Baltics, which heightens risk perception
The retail sector is being supported by tight supply, largely as a result of restrictive planning
The Nordic region is small but is also wealthy and stable Once the current financial/economic crisis is over, investors’ perception of
risk will have changed and the region stands to benefit from the fact that these countries are some of the cleanest in environmental terms, least corrupt and socially stable in the world
21
Challenges for the Future
Likely trends in the future? Consumer uncertainty Increased polarisation - retailers
Stealing market share Slower volumes Good value
Continued flight to quality and dominance
Increasing tenant demand Support for new retail companies? Lack of new pipeline for 3-5 years