Newsletter Q1 UK 2018

Newsletter Q1 2018

Analysing market trends from a geographical perspective, there are no immediate signs to suggest a fundamental change in grocery retail market characteristics.

Not a Copenhagen phenomenon

closures among the ranks of established retail chains within the next five to ten years, when the non- terminability periods of existing leases reach expiry. Urbanisation too is believed to become a factor to be

Analysing market trends from a geographical perspective, splitting Denmark down the middle, with the eastern part including postal codes 0-4999 (i.e. mainly Zealand – including

Greater Copenhagen – and Funen), and remaining postal codes denoting the western part (mainly Jutland), there are no immediate signs to suggest a fundamental change in grocery retail market characteristics. Growth is concentrated in major towns and cities, whereas smaller towns to a varying degree are hit by faltering turnover figures and shop closures. In the eastern part of Denmark, Copenhagen is the evident growth centre, which tallies with demographic trends, whereas we see growth in a wider selection of town sizes in the western part of the country. Growth in some of the smaller towns and cities is believed to be prompted by political initiatives, such as legislative changes in planning provisions, making it possible to set up grocery shops with a larger sales area than in the past. Expansion potential – in the right places Because of structural changes in the grocery retail market, investors in the market for grocery shops are not only required to be alert to a shop’s market performance and any unexpired non-terminability period of the shop lease. Sadolin & Albæk believes that it is also important to factor in underlying demographic movements in a given area to get an idea of how variables such as age composition and purchasing power will change over time. This is especially important when investing in areas already subject to competition between different local grocery shops. Overall, we therefore believe that the strong competition in the grocery retail market in smaller towns and cities will prompt further shop

reckoned with in future, in terms of both vacancy rates and rent levels for units suited for grocery retail in certain parts of Denmark. Conversely, Sadolin & Albæk estimates that the grocery retail markets of quite a few major Danish towns and cities continue to have spare capacity, with fundamental demographics allowing for an expansion of sales areas and turnover. As a result, investment opportunities in major towns and cities are believed to be driven by underlying factors that are deemed to have a favourable impact on the grocery retail sector, in the short term as well as in the long term.

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