Luxembourg

LuxembourgA small territory of 563,000 inhabitants surrounded by Belgium, the Netherlands, France and Germany, the Grand Duchy of Luxembourg is known for its prosperous economy, and for being the wealthiest country globally and a major financial hub in Europe. Considered a safe haven in turbulent times, Luxembourg welcomes international funds, banks and insurances, IT multinationals as well as EU Institutions (e.g. the European Court of Justice).

With its central location in Europe and its high level of salaries, Luxembourg attracts lots of commuters from the surrounding countries. That makes Luxembourg a (European) cosmopolitan country, where French, German and the local language Lëtzebuergesch are spoken.

Luxembourg is also a very popular retail destination. It is not unusual for shoppers from France, Germany and Belgium to shop in Luxembourg, as prices for some goods remain cheaper, although that trend is progressively declining as tax and prices tend to harmonize across the EU.

This dynamic retail nature is confirmed by several indicators, among which are the long-lasting positive trend in retail turnover, the high density of shopping centers per inhabitant and the relatively high prime rents in high street retail.
Besides shopping centers, out of town retail and high street retail also have their shares of the market. There is high development potential in the out of town retail market, while high street retail remains concentrated in a limited number of streets.

Over the last few years, the removal of a legal moratorium on large retail developments has generated new significant retail schemes, and this is a trend that is likely to continue for some years yet.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*20152015F2016F2017F2018F
GDP growth 2.82.62.92.92.8
Private Consumption Growth 2.62.02.42.42.4
Industrial production 11.4-0.52.12.92.7
Investment 3.73.73.33.03.7
Unemployment rate (%)7.17.17.06.86.5
Inflation 0.70.51.92.01.9
€/US$ (average) 1.31.11.11.11.1
Interest rates Short Term (%) 0.20.00.00.00.2
Interest rates 10-year (%) 1.30.51.11.62.0

Note: *annual % growth rate unless otherwise indicated. E estimate F forecast

Source: Oxford Economics Ltd. and Consensus Economics Inc

ECONOMIC BREAKDOWN
Population 0.56 million (2015)
GDPUS$ 62.7 billion (2014)
Public sector balance 0.6% of GDP (2014)
Parliament A grand coalition of the Democratic Party, LSAP, and the Greens
Head of State Grand Duke Henri
Prime Minister Xavier Bettel
Election date 2018
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
LUXEMBOURG2009201020112012F2013F
Retail Volume1.96%9.00%6.43%1.40%3.00%
Retail Value-0.10%12.19%10.12%3.52%4.91%

LARGEST CITIES
CITYPOPULATION
Luxembourg111,300
Esch-sur-Alzette33,300
Differdange24,300
Dudelange19,700
Pétange17,600
Mersch (11th)8,900
Ettelbruck (13th)8,400
Source: STATEC

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Luxembourg: 49.804314, 6.119385

MAJOR DOMESTIC FOOD RETAILERS

Cactus, Alima

MAJOR INTERNATIONAL FOOD RETAILERS

Auchan, Delhaize, Colruyt, Aldi, Intermarché, Match, Lidl, Carrefour

MAJOR DOMESTIC non-FOOD RETAILERS

Smets, Freelanders, Batiself, Adler, Paris 8, La Maroquiniere du Passage

INTERNATIONAL RETAILERS in LUXEMBOURG

Inditex Group (Zara, Massimo Duti), H&M, Esprit, S Oliver, Grand Optical, Cool Cat, Saturn, Sephora, Promod, Calzedonia

Food & Beverage Operators

McDonalds, Quick, Subway, Bofferding, Exki, Pizza Hut

TYPICAL HOURS
MONDAY-FRIDAYSATURDAYSUNDAY
09.00-18.00 (09.00-20.00 for supermarkets & shopping centers) 09.00-18.00 (09.00-20.00 for supermarkets & shopping centers) Legally limited (12 times max per year)

The Luxembourg economy is very open and one of the most international markets in Europe. While there are no Luxembourg retailers operating abroad, many international players have settled in Luxembourg, recognizing the revenue potential generated by the country’s wealth. The majority of retailers operating in Luxembourg are foreign. The largest local group, Cactus, has not made any impact outside the country.

The total existing stock of shopping center space in Luxembourg amounted to about 240,000 sq.m GLA in 2015. Shopping center stock in Luxembourg is characterized by one of the highest level of provision in Europe when measured in terms of GLA per thousand population.
Luxembourg also enjoys a fine peripheral retail offer, however limited to match an ever-growing demand, especially from Belgian retailers who are eager to settle in the Grand Duchy, suggesting potential for future development.

Between 1996 and 2005, a moratorium prevented the construction of any retail floorspace above 10,000 sq.m, and literally locked local retail development. Since 2005, the end of the moratorium has encouraged new projects and has brought a new dynamic to the retail real estate development market. This trend is still underway.
There are no factory outlet centers in Luxembourg, with the closest being McArthurGlen in Messancy (Belgium).

E-commerce has developed less rapidly in Luxembourg than in most other EU countries. This is mainly due to the proximity of physical stores from almost all locations, and also from an arguably quite conservative state of mind. From a broader perspective, e-commerce is hindered by recent legislation requiring VAT to be paid based on the country of residence, limiting the advantage of Luxembourg’s relatively low, though increasing, tax position.

It is possible to enter the Luxembourg retail market directly, although many retail groups franchise and enter via concessions/shop-in-shops. On average 5 to 6 new entrants enter the Luxembourg market every year.

There are no restrictions on foreign companies either buying or renting property in Luxembourg.

Although it is possible to occupy a new building within a few weeks, it is more realistic to expect that on average it will take about 6 months from initiating the property search to taking occupation of an existing property. This includes time for considering location options, the identification of buildings or sites, negotiating leasehold or freehold terms, obtaining of necessary permits and drafting of the appropriate legal documentation.

In general, new stores must also obtain a permit consistent with their type of merchandise range. Any new store above 400 sq.m must also obtain a building permit as well as a licence before opening. For stores above 2.000 sq.m, two notifications by governmental commissions are compulsory.

 

New Entrants to the Market

PrimarkGalerie InnoVeritasKrëfelCool Cat / America TodayTiffosi

TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE (GLA SQM) YEAR OPENED
City ConcordeBertrange47,0001974
La Belle EtoileBertrange35,000 (+15,000 exp)1974
Knauf CenterSchmiede30,8002002
Auchan-KirchbergLuxembourg23,5001996
Belval Plaza IEsch-sur-Alzette20,0002008
TopazeMersch16,5001994

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsParties are free to determine the duration they wish but leases are typically 3,6,9 year terms for small surfaces (<500 sq.m) and 5,10 or 6,9 years period for business space property over 1,000 sq.m and 9 or 12 years for retail area over 1,000 sq.m. In a 3,6,9 year leases, breaks are at both 3 and 6 years. In a 5,10 year lease the break is at 5 years and in a 6,9 at year 6, operable by both parties (if not specified in the lease, the break option is valid for both the tenant and the landlord). That aside however, breaks are by negotiation only and are not frequently seen. Early termination is only possible by negotiation and agreement with the landlord. Notice periods to break are set out in the lease but are typically 6 months.
Rental PaymentRents may be freely negotiated and are typically quoted in Euro’s per sq.m per month. They are paid monthly or quarterly in advance. A security deposit of 3 to 6 months rent is usually required. A bank guarantee is also common and personal guarantee by a company or a group guarantee is also not unusual in the market.
Rent ReviewMarket reviews are uncommon before the end of the lease but can be agreed by negotiation, usually before a break option. Annual indexation is typically seen, tied to inflation (the Consumer Price Index from STATEC base 1948 index C1 or C2). Indexation occurs usually on set dates once a year or in some cases may be triggered if inflation reaches a certain limit (5pts change in CPI).
Service Charges, Repairs and Insurance In general, the tenant should not undertake any alterations without landlord approval. Repair and maintenance provisions will be agreed in the lease contract. Typically, the landlord is responsible only for structural repairs. He is also responsible for building insurance and the tenant for contents insurance. The tenant is responsible for internal repairs and maintenance of the leased area, and for any defects relating to the normal use of the property for its intended purpose. The maintenance of the technical equipment and common areas are charged to the tenant via the service charges. The service charge covers operating expenses such as management fees, security, cleaning, internal maintenance of the common parts, servicing of lifts, external maintenance, water and electricity. Heating and air conditioning costs for the common parts are also included.
Property Taxes and other costs The "impôt foncier" is a local property tax on the value of real estate. It is charged annually by the municipalities at varying rates depending on the location, nature and use of the property and may not exceed 7,5% of the unitary value of the property. Although there is no direct correlation between unitary value and market value of the property, one can say that the unitary value usually ranges between 0.7-1% of the market value. The property tax is charged by the local authority to the landlord. Typically charged back via service charge. If applicable, VAT on rent equals 15%. The registration of the lease is mandatory usually under tenants costs and responsibility: - If VAT options exist, Stamp is 13 €. - If no VAT option exists, Stamp is 0.6% of the total lease payments including VAT for leases up to 9 years and 1.6% of total leases payments including VAT for leases of 10 years and more.


Luxembourg Contacts

VIRGINIE CHAMBON

Head of Luxembourg Retail Agency
287-289 Route d’Arlon
L-1150 Luxembourg
Tel: 352 27 21 33