Colliers Copenhagen Property Market Report 2019

Retail – Market Report 2019

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International investor appetite remains strong in the retail segment

top-league gourmet restaurants and the popular Reffen food market, which opened in 2018. In addition, art galleries and workshop communities, etc. have settled on the island, breathing new life into buildings that stood empty only ten years ago.

Fierce competition puts a strain on F&B earnings and challenges concepts

The boom in the F&B market has greatly intensified competition in this segment. According to an analysis by consulting firm Deloitte, 2017 alone saw almost 2,500 new startups in the F&B sector. In addition, the offering of eating places has grown much larger and more varied in recent years, with restaurants and other F&B providers competing fiercely for customers and struggling to retain earnings. This is reflected also in the number of bankruptcies in the sector. In 2018, the number exceeded 500, marking a ten-year high. In addition, the Deloitte analysis shows that more than 40% of restaurant operations in Greater Copenhagen run at a deficit. As a result, recent years have seen budding signs of an elimination race in the F&B community, with the strongest and best located restaurants and F&B concepts gaining market share. This applies also to the food courts and markets springing up all over Copenhagen in recent years. In the final months of 2017, the popular street-food market of “Kødbyens Mad & Marked” in the former meatpacking district was forced out of busi- ness due to various unprofitable activities. By the same token, “WestMarket” was forced to close in the second half of 2018, following a long period of faltering sales and stall- keepers gradually vacating their stalls. Although both Kødbyens Mad & Marked and WestMarket benefitted from an attractive location, location is no longer sufficient if you want to survive: It requires a strong combination of structural layout, tenant mix, marketing and retail offering. Bearing in mind the strong competition in the segment, many restaurants and F&B providers struggle to retain the profits required to pay the higher rents. As a result, many of them tend to face financial difficulties even after a rela- tively short period of operation. We therefore recommend continued monitoring of this segment in order to understand the importance of location, concepts and dynamics in the rental market.

Domestic 35%

65% Foreign

Note: Retail transaction volume by investor origins. Retail transaction volume, Greater Copenhagen. Source: Colliers International

Core investments continue to push out value-add and opportunistic investments

Increased F&B competition takes it toll

0 100 200 300 400 500 600

1% User 48% Value-add 51% Core

12 11 10 09 Note: Number of bankruptcies, Danish restaurants. Source: Statistics Denmark

18 17 16 15 14 13

Note: Retail transaction volume by investment type. Retail transaction volume, Greater Copenhagen. Source: Colliers International

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