How bad is Luxembourg’s retail crisis?

The pandemic, the Russian energy crisis, inflation, high rents, lower purchasing power and security concerns have all piled pressure on retailers in Luxembourg – and caused a number of them to fold – but the situation is improving, say experts.

Most weeks there’s something in the news about struggling retailers and Luxembourg’s shopping districts in decline. A string of closures by international brands like Esprit and Scotch & Soda has come hand in hand with local shopkeepers calling it quits, such as the Wanderscheid delicatessen or Bagatelle concept store.

“The worst area is definitely the station area, with Avenue de la Gare, Avenue de la Liberté. That’s definitely where we observe the higher vacancy rate,” said Virginie Chambon, head of retail at real estate company CBRE Luxembourg. “But if you look at the city centre – Grand-Rue, Rue Philippe II, etc. – well, yes, we have some vacancies, of course, but it’s a lower rate.”

At 12.3% the vacancy rate overall has remained stable from 2019 to 2023, although it is higher around the Gare than in the centre, said Tom Baumert, CEO of Luxembourg Confederation – an umbrella of 22 service, trade and transport federations representing 1,800 Luxembourg companies. “When we look at the numbers, we cannot say that it’s a real problem,” he said.

Not only is Luxembourg retail not in crisis, according to the Confederation, it is even flourishing: “Compared to other cities around Luxembourg or even in Europe, it’s fantastic to have twelve-point-something. A lot of cities are 20 or 25% even when it comes to cities around Luxembourg.”

A busy day on Grand-Rue in Luxembourg’s city centre. © Photo credit: Chris Karaba

You get what you pay for

Rent levels are rarely the reason retail units stand empty for years on end, said Chambon. Many businesses she works with would refuse to move their stores to the Gare, she said, even if they had to pay zero rent for two years. At the same time, there is more demand than supply in the prestigious Ville Haute area.

“I have a list like this of new brands wanting to come to Luxembourg,” she said, stretching out her hands, “but to be based specifically on Rue Philippe II, ‘because the luxury brands are there and I want to be there or nowhere else’. So, the demand from the luxury sector is very active, probably the most active.”

Shopping centres, too, are doing well. Footfall at Belle Etoile, for example, long ago returned to pre-pandemic levels, said Chambon, and Luxembourgers are still more inclined to go to real shops than buy online.

“The other thing is that to go from the south of the city to the north, or east-west, is quite easy to drive,” she said. “People like doing their shopping and taking their car from Belle Etoile to the city centre and come back to City Concorde, maybe Cloche d’Or, in the same day, because this is something that you can do, whereas you could not make it in Brussels or Paris, for example.”

Cities in competition for first time

As recently as 30 years ago the only competition a city centre faced for customers was from other city centres. Now, they are in competition with the internet and shopping centres, Baumert noted.

“Why is the customer still coming to your city? What are the advantages? How is he coming? Can he find parking and does he have a bus or train that is coming? How long does he have to wait? Is it secure?” he said. “I don’t say that this wasn’t important, but there was no alternative to the city centre. Even when it was quite bad, people came. Basically the choice was going to the city centre, or going to the city centre. But today when it takes them, I don’t know, 30 minutes to go two kilometres, they choose the internet instead.”

Municipalities need to think differently, the lobbyist said. “They have to become very strategic what they are trying to give the customers. The customers could be inhabitants, but not only – for the city of Luxembourg, there are more tourists and more people coming to the city every day than living there. And how do you attract them for the weekend? What are you doing so that they are coming?”

That can include live music, art and cultural activities, he said.

Shopping centres like Belle Etoile continue to do well © Photo credit: Myriam Lima-Schmit

Grimy Gare

However rosy the overall picture may be, the Gare district has seen units lie vacant for five years or more.

“The Quartier de la Gare is a very animated and diverse part of the city where there are so many people,” said Luxembourg City’s deputy mayor Maurice Bauer.

While residents in recent years have staged numerous protests to call out policymakers to address crime and drugs, Bauer has found that “a lot of people who live there are so happy about their living conditions […] But of course, something which we hear regularly, is that in the evening, the population changes a little bit.”

There is a strong correlation between the perceived quality of a street and that of its retailers.

By tolerating things like broken windows, dirty streets, graffiti, petty crime or outdoor drug taking, areas become exponentially worse in the long-term under a 1982 theory by social scientists James Wilson and George Kelling. Proactively fixing the problems stops more from being created.

“One unrepaired broken window is a signal that no one cares, and so breaking more windows costs nothing,” the authors wrote. Crime does not simply transplant from the improved space into other neighbourhoods, research also shows. Rather, neighbouring areas benefit from lower crime, too.

Regeneration underway

Rather than sprucing up the area, Bauer has found some complacent landlords none too interested in finding new tenants. In Luxembourg’s property market, they bank on the value of their real estate increasing either way. “But on the other hand, if one day there are too many vacancies, then that whole part of the city will diminish and will not be able to maintain this level. So, from that point of view, they have a personal interest in looking to find a new shop or retailer to enter their units,” said Bauer.

“You know, what really matters to a new retailer is who are the neighbours,” Chambon said. “Who is the retailer next to me, on my left, on my right, facing me? They just want to make sure they will have the right footfall, because the clients of my neighbours are my potential clients too.” Empty shops can quickly multiply, but so can successful ones.

One way of regenerating an area is to create an island of new retailers, Chambon said. Getting one high profile new retailer into a depressed area will not help much but persuading a few desirable brands to open up can have a positive ripple effect.

In September, Maurice Bauer announced that two major names are coming to the Gare district. The first is confirmed to be Sports Direct, which will open in December where Maisons du Monde closed a year-and-a-half earlier. Still unconfirmed at the time of writing, the second new store is rumoured to be Action.

Maurice Bauer, First Alderman of the City of Luxembourg. © Photo credit: André FELLER

Pop-up stores have also been used to good effect in the City of Luxembourg. The city approaches landlords and takes on short-term rentals that it passes on to entrepreneurs at cut price for six months, Bauer said. At just €650 the (at present nine) premises give fledgling businesses a helping hand to succeed. A quarter of them end up moving into their own locations and staying in business after their pop-up period expires.

The temporary boutiques have also been used to lure established brands back into the city centre from the shopping centres as a proof of concept ahead of re-investing in the area. Bauer cites Sichel as an example, which is taking tentative first steps downtown again after many years only at City Concorde.

Bauer hopes that more new retailers will follow – especially to Gare – and notes the city’s efforts to regenerate the streetscape there, for example Rue de Strasbourg: “It’s much nicer to sit down there and this is also something where we can do something about the situation. A more pleasant environment.”

The homeless problem

Safety and security are closely link to making the environment more pleasant.

Wilson and Kelling’s Broken Windows Theory has sometimes been used as justification for police crackdowns that do little to resolve core problems in the longer term. Homelessness is one such problem that cannot be solved by police alone.

“We have enough for every person to sleep during winter months in a shelter,” Bauer said. “The problem is that it’s an offer. If people don’t accept it, we are not able, as long as they are not aggressing people, […] to force them to take care of themselves. That’s, by the way, an interesting question: does our society have this obligation to force these people to take care of themselves? Or do we have to give them the total freedom to do with their lives what they want to do? It’s an interesting question. For the moment we are opting for the answer ‘no, they are free to do whatever they want’.”