European shopping centre giant Unibail Rodamco says retailer bankruptcies in the Dutch market dragged down its net rental income there by 8.1% on an absolute basis in 2016.
The failure of Dutch department store chain V&D early on in the year but also sports retailer Perry Sport had a particularly strong impact, the company's CFO Jaap Tonckens told journalists in a conference call on Wednesday. 'The Dutch market has seen a disproportionate number of bankruptcies in 2016 and this has also had an impact on our business.'
Unibail-Rodamco has three former V&D stores in its Dutch portfolio in Almere, Hilversum and Leidsenhage. But the news is not all bad, Tonckens said. The Paris-listed company has since signed a lease with Canadian department store chain Hudson Bay Company for the former V&D store at its Almere shopping centre.
The new store is due to open in the next 18 months. The Canadians have also signed a deal to move into a former V&D store in Amstelveen, but that location belongs to Dutch insurer ASR. Unibail-Rodamco is in talks with Hudson Bay as well as other parties for its former V&D stores in Hilversum and Leidsenhage.
The Dutch market is currently undergoing a Darwinian struggle for survival, but the company's patience has been tried and poorly performing stores will need to get better or get out, Tonckens warned. 'We are not a utility company that provides space at a low, fixed rate so that retailers can make money. The overall economy is improving and if tenants are not benefitting, they need to ask themselves a fundamental question whether they need to change the model to survive.
'Clearly some formats like V&D were no longer meeting the demands of their customers and didn’t adjust fast enough. Of course there will be some short-term pain, but we see a longer-term gain.'
Same old stuff
Dutch retailers are less innovative than some of their counterparts elsewhere in Europe such as Germany and France, he added. 'Perry Sports had no differentiating factor, the brands that it sold could be found everywhere else as well. A product becomes a commodity when price is the only thing that matters. The customer has no reason to go to that particular store when it's only offering the same old stuff as everybody else.'
The Dutch market has been dragging down Europe's largest listed real estate company for several years now, but 2016 will be the last year of pain, Tonckens predicted. The Franco-Dutch retail landlord succeeded again in attracting a significant number of international retailers in 2016 such as Kiko (pictured) and Pull&Bear, and the Dutch economy has turned the corner, he added. ‘We’re seeing a lot of international retailers coming to the Netherlands. Many of them still have a relatively low level of penetration and are signing up rapidly. We see that as a vote of confidence.’
Other international retailers on the expansion path include make-up store Nyx, Uniqlos, Mudgee and New Balance, Tonckens said.
Another positive development for the Dutch market is Unibail-Rodamco’s Mall of the Netherlands which is due to open in the first half of 2019. The building permit has now been granted and the company will tendering for the construction in the next few weeks. Construction of the garage has already begun and the official launch for tenants is scheduled for 9 March.
In total Unibail-Rodamco has a development portfolio of some €8 bn with the Mall of the Netherlands accounting for around €500 mln of that figure. 'The Mall of the Netherlands is a very significant investment for us,' Tonckens confirmed.
