Colliers Market Report Denmark 2023

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Retail - Colliers Market Report 2023

Before year-end 2022, Aldi announced its exit from the Danish market along with the sale of a large share of its shops to Rema 1000. Although Aldi has chosen to dis continue its Danish operations, the sale bears witness to a continued strong low-price market as Rema 1000 is expanding its Danish portfolio, in the process strengthen ing its market position. Domestic as well as international retail chains enjoy the benefits of being able to change the composition of their own lease portfolio, with a focus on the most profitable stores in top locations making it possible to cut costs in a market affected by straining household budgets. We foresee an increasing number of shop relocations and lets in 2023 because the chains will be required to gather strength and optimise operations to retain profitability. Properties in prime locations with a tenant mix predom inated by retail chains are therefore less vacancy prone. Secondary properties with a weaker tenant mix and properties housing specialty-shop tenants, however, are associated with a higher vacancy risk.

Low-budget stores make strong tenants Against the backdrop of economic uncertainty and weak ening purchasing power, low-budget stores seem to be strengthening their position in the retail market, mak ing them more interesting prospective tenants. Unlike the stronger demand forecast for the low-price segment, the demand for luxury goods is potentially set to weaken. Although rising energy prices have made it a costly affair to keep supermarkets open, low-budget stores remain top-pick tenants as they have proven their resilience to downturns, most recently during the coronacrisis.

Basalt – makeshift or viable low-budget concept?

In autumn 2022, Denmark’s largest grocery shopping group, Salling Group, launched a brand-new low-budget or discount concept: Basalt (“Basic”), counting 10 shops across Denmark by year-end. The concept may perhaps best be described as super low-budget as the objective is to offer a 10-20% discount on the prices of existing low-budget stores, including Netto, 365 by Coop as well as Lidl and Rema 1000. The discount is made possible by Basalt offering shorter opening hours, a narrower selection of goods, smaller shop units and – perhaps most importantly – neither refrigerated nor frozen food, to substantially reduce electricity consumption. The timing of the launch was perfect as Danish consumer budgets were stretched due to sky-high inflation, an unprecedented erosion of

real wages and a bleak economic outlook. It remains to be seen if the demand for the Basalt concept will abate once the economy returns to normal, with real wages rising, etc., or if Basalt manages to win over Danish consumers. In the latter case, we believe that other grocery shopping groups, e.g. Coop and Dagrofa, are very likely to establish similar super low-budget stores, albeit with the risk of cannibalisation among existing low-budget concepts. From a landlord perspective, new concepts will serve to directly widen the field of prospective tenants, potentially increasing the demand for suitable prem ises. However, it may also trigger an opposing effect if coinciding with a drop in the number of traditional low-budget stores.