“In the Netherlands, there’s an average 10% probability that a store will stop in its current location,” explains Mattijn Bezemer during a breakfast session at Locatus. Gulp. Ten percent. That’s quite something. But you can also drown in 10-cm deep river. It’s more interesting to look at the local picture
Locatus’ breakfast session was about the Retail Risk Index: what is the chance for a store to be at the same place next year? This index is more than an average and more than a risk calculation. It provides a good image of how healthy or unhealthy a shopping area or shopping street actually is. What are the insights provided by the Retail Risk Index? Gertjan Slob told us more about the subject:
More stoppers than starters
Since several years now, the number of stoppers has been higher than the number of starters As a consequence; the vacancy level is still growing in the Netherlands.
Figure 1: starters & stoppers in the Netherlands
But again, this is an average. Here also it varies by sector. The average percentage of stoppers is at 8%. For the video rental industry, the number of quitters early this year is over 35%. Oddly enough, there are still people who are opening a video library.
Figure 2: Starters and stoppers in the video sector
The hearing aid sector shows a very different course. For years, the % of starters in this sector has been higher than the number of quitters. The number of sales outlets also increased steadily. But in 2013 we saw a change. Hearing aids were no longer reimbursed, and we saw that the percentage of quitters increased considerably, while fewer entrepreneurs dared to open a store in this sector.
Figure 3: starters & stoppers in the hearing aid sector
Chances of a new tenant for a vacant store
The Retail Risk Index (RRI) evaluates the chance for a store to stop its activity. But it can also give us some indication of the probability for the store to host a new activity. Gertjan took two samples.
Sample 1: highest RRI
The first sample was of 500 stores with the highest RRI value in early 2013 (the highest risk that they would stop their activity). Of these stores, 151 had stopped by January 1, 2014 (30.2%). Later it appeared that of these 151 stores, 113 were occupied again. After a year, 38 stores were still vacant (7.6%).
Sample 2: lowest RRI
The second sample was of 500 stores with the lowest RRI value (the lowest risk that they would stop their activity). Of these stores, 27 stores had stopped by January 1, 2014 (5,4%). Later it appeared that of these 27 stores, 26 were occupied again. After one year, just one store was still vacant (0,2%).
The redder the Retail Risk Index traffic light, the smaller the probability of new tenants. The greener, the higher the probability. These were samples from stores throughout the Netherlands. But what is the Retail Risk Index telling us about specific shopping areas?
Results Retail Risk Index per shopping area
In order not to drown again in averages, here too Gertjan observed the positive and negative peaks.
Top 5 shopping areas with bad Retail Risk Index scores.
(the redder, the higher the probability of stoppers)
In these five shopping areas, the probability of stopping is relatively high. The names will probably sound familiar to you. These are also the names of the shopping areas in which store vacancy is high.
Top 5 shopping areas with good Retail Risk Index scores.
(the greener, the smaller the probability of stoppers)
On a map you can see immediately which area is attractive. Gertjan took Schagen and Geleen as an example.
As a tenant, if you then have to choose between two buildings of the same size, you’ll prefer a healthy shopping area. So here it goes again, the greater the probability of stoppers, the greater the likelihood of vacancies, and the smaller the chance of new tenants.
We can even be more specific. Which segment has a better future? Which street? This allows you to monitor your wallet or your central area. Where are the sore points? Where is it least likely to find new tenants?
Curious to know how the Retail Risk Index is built?