The cheapest city centres to rent retail space in the Netherlands are medium-sized and smaller cities such as Groningen, Eindhoven, Tilburg, Breda and Arnhem. In these cities, rental prices per m² for retail space are structurally lower than in Amsterdam, Utrecht or The Hague. The exact rental price depends strongly on the location within the city, the type of property and the market conditions at that time. This article answers the most frequently asked questions about rental prices for retail space in Dutch city centres, so that you as an entrepreneur can make a well-informed decision.
Which cities have the lowest rental prices per m² for retail space?
Medium-sized cities such as Tilburg, Breda, Arnhem, Heerlen and Leeuwarden have the lowest rental prices per m² for retail space in a city centre. In these cities you pay significantly less on A-locations than in the four major cities. Groningen and Eindhoven fall somewhere in between: attractively priced for the pedestrian density they offer.
For comparison: the top rental prices on the Kalverstraat in Amsterdam are among the highest in Europe. In a city like Tilburg or Arnhem you can pay a fraction of that amount for a comparable A-location. This means lower fixed costs, more room for staffing costs and a shorter payback period for your investment in the fit-out.
Cities in shrinking regions, such as parts of Zeeland or Limburg, sometimes have even lower rental prices. But low rental prices there are often a signal of structurally declining footfall, which limits their attractiveness as a location. A low rental price per m² for retail space is therefore not automatically an advantage.
What determines the rental price of retail space in a city centre?
The rental price of retail space in a city centre is primarily determined by footfall, the position in the shopping street and the type of tenant a landlord attracts. The more passers-by walk past the door, the higher the rental price. In addition, the surface area, layout and condition of the property play a role.
The location within a street makes a big difference. A property at the beginning of a shopping street or near an anchor store attracts more visitors than a property halfway down a side street. Landlords price this in. The width of the facade also counts: a wide facade with high visibility justifies a higher rental price per m² than a narrow property with the same floor area.
Furthermore, the tenant mix in the surrounding area plays a role. If a street has a lot of vacancies or a declining retail mix, the rental price falls. Conversely, the rental price rises when strong brands establish themselves nearby and increase the appeal of the street. For a starting entrepreneur, it is therefore important to look not only at the price, but also at the dynamics of the street as a whole.
What are common additional costs on top of the base rent?
In addition to the base rent, as a tenant of retail space you typically pay service charges, a contribution to the entrepreneurs’ fund or the BIZ (Business Investment Zone), and VAT on the rent. In shopping centres, marketing contributions and management fees are added on top of this. Together, these costs can amount to 15 to 25 percent on top of the base rent.
Service charges cover shared facilities such as cleaning, security, lighting of common areas and sometimes climate control. In a shopping centre, these costs are higher than for a standalone property in a shopping street. Always ask for a breakdown of the service charges before signing a lease, as the variation between locations is considerable.
Don’t forget the one-off costs either: key money or a security deposit of three to six months’ rent is common. In addition, you pay for the fit-out, permits and any renovations. When comparing retail space rental costs, you must therefore always calculate with the total operating cost, not just the rental price per m².
How do you objectively compare rental prices between different cities?
To objectively compare rental prices for retail space between cities, you use the rental price per m² for comparable location types, combined with the expected turnover per visitor at that location. A lower rental price in city A is only advantageous if the revenue potential is proportionate to the costs.
A useful method is the rent-to-sales ratio: the percentage of your expected turnover that you spend on rent. For most retail formats, a healthy rent-to-sales ratio is between 8 and 12 percent of turnover. If you generate less turnover in a cheaper city, the rent-to-sales ratio may still turn out unfavourably.
Also compare the catchment area of the city. A city with 200,000 inhabitants and little competition can be more attractive than a large city where, as a newcomer, you compete with dozens of similar shops. Guidance when renting retail space helps you make this comparison based on current market data, not assumptions.
When is a cheaper location not the best choice?
A cheaper retail location is not the best choice when the lower rental price is the result of structurally declining footfall, high vacancy rates in the surrounding area or a weakening retail mix. In that case, you pay less rent but miss the turnover you need to operate profitably.
A B- or C-location in a city with high vacancy rates can damage a retail concept in the long run. Visitors visit a shopping street as a whole; if the street looks deserted, that drags your shop down with it. Low rental prices in such areas are often a symptom of an underlying problem, not an opportunity.
Moreover, brand positioning plays a role. If you run a premium or lifestyle concept, customers expect an environment that matches it. A low rental price in the wrong location can undermine the perception of your brand, which in the long run proves more expensive than a higher rent in a better location. At KroesePaternotte we assess locations not only on price, but on the overall commercial profile.
How do you find available retail space that is not listed on portals?
Available retail space that is not listed on public portals can be found through specialist retail agents with direct relationships with owners, developers and shopping centre managers. A large proportion of the best locations in the Netherlands are never publicly offered, but are transacted through networks of market parties that have daily contact with landlords.
Public portals also regularly show properties that have already been let or have been vacant for a long time without an active landlord. This gives a distorted picture of the actual supply. Those who search only through portals miss a substantial part of the market and also have no access to the rental price history needed to assess an offer.
KroesePaternotte has been building lease contract data on virtually the entire Dutch retail market since 1984. This makes it possible to quickly assess whether an asking rental price is in line with the market and to negotiate on behalf of a tenant based on facts. Through the current retail space listings you gain access to locations that are not available through the usual channels. For entrepreneurs who are seriously looking for affordable retail locations in the Netherlands in the right place, that difference is decisive.
Would you like to know what realistic rental prices are in the cities you are considering, or would you like access to non-public listings? Get in touch with the retail specialists at KroesePaternotte for a no-obligation conversation about your search.
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