Summary: Revo launched its Insightful’19 report on the current market and future retail trends during its seminar, at our London office, on 10 January 2019, dubbed Super Thursday. Aside from Brexit uncertainty, rising costs coupled with lower consumer spending and the pressures of online retailing; Revo predicted that demographic changes; technology development; ethical consumers and the repurposing of retail will be hot topics going forward.
Predictions for Retail in 2019
Revo launched its Insightful’19 report on the current market and future retail trends during its seminar, at our London office, on 10 January 2019, dubbed, Super Thursday (the day most retailers announced their Christmas trading results).
The challenging trading environment of 2018 discussed by Revo was reinforced by the British Retail Consortium warning that UK stores experienced their worst Christmas trading period since the financial crisis 10 years ago.
Between January and November 2018, 38 medium to large retailers failed or went into administration affecting 2,900 stores and Revo predicts that there will be more store closures and CVAs to come in 2019.
The continuing effects of Brexit uncertainty, rising occupational and operating costs coupled with lower consumer spending and the increasing shift to online retailing have all contributed to the profound changes affecting the retail sector. Revo predicted other factors will affect retail in the future: demographic changes (e.g. the ageing but wealthy population); technology development; ethical consumers and repurposing of retail.
The Revo panel discussing these trends were Kim Politzer, Director of Research European Real Estate for Fidelity International, Barry Gross of Bryan Cave Leighton Paisner LLP, Lara Marrero, Strategy Director and Global Retail Practice Leader at Gensler and Alex McCulloch of CACI Property Consulting Group, expertly chaired by Mark Robinson, Revo President and Property Director and Co-founder of Ellandi.
For the investment market, Kim Politzer commented on how retail rents were falling, values were edging lower and investor expectations had not adjusted quickly to the changing retail market. Kim said that pricing is still distorted and the expected 4% yield is likely to shift to 6%. Kim dismissed a notion that retail was “toxic” and predicted a period of pain and that investor confidence would take time to bounce back.
Alex McCulloch commented that 49% of retail centres are over spaced and that this was not as a result of any geographical factors but more about those retail centres lacking active asset management.
The panel agreed that size is not everything and the catchment area, competitor locations, tourism focus, working population and the role of the community were some key elements to successful retail space. Lara Marrero commented on how engagement with consumers and not just experience was important and how retailers need to facilitate consumers seamlessly interacting with physical and digital retailing.
The future of the 15 year retail lease and the relevance of the Landlord and Tenant Act 1954 were discussed. Alex McCulloch commented that retailers need to be agile to react to changing consumer demands but landlords also need to be flexible on lease terms and floor space to help retail evolve.
There was unanimous agreement that there will always be a market for retail. Humans’ desire to connect provides a continuing role for the physical store, but retailers need to adapt to the change in demographics, and consumer behaviours and embrace the digital revolution.