2022: Retail set for recoveryOwen Mitchell
As we all trudge into our third year under the cloud of the Coronavirus pandemic, there are plenty of reasons for the industry to be optimistic about the year head – none more so than for the retail sector.
Retail has been through a tough few years, with significant structural changes exacerbated by Covid. The inexorable rise of e-commerce, business rates and other taxes coupled with high rents in places like the UK have meant it has been difficult for traditional bricks and mortar retailers to compete with a vast online offering.
However, throughout the pandemic, as soon as lockdown restrictions have eased, footfall has bounced back in a demonstration that consumers’ appetite for physical retail remains. The high street drove significant sales growth in the build-up to the festive period, despite the publicity of Black Friday and Cyber Monday or the emergence of the omicron variant impacting footfall in the latter stages of December.
In addition, Primark – the UK’s second biggest clothing retailer –announced plans to open 130 stores around the world over the next five years, whilst Amazon continues to reinforce its faith in bricks-and-mortar by opening several physical stores worldwide. Retailers recognise that the shop floor will continue to play a key role in driving a positive brand experience and can still offer a huge return on investment.
Having proved its resilience over the past few years, it’s unsurprising that that the retail sector is highly sought after, yet investor interest is growing for a broader range than just space on the high-street. Out of town retail, designer outlets and prime shopping centres may all be headed for a successful year.
Outlet centres with ‘best in class’ operators and turnover-only rents are certainly witnessing heightened interest. This week La Salle Investment Management acquired Cheshire Oaks and the Swindon Designer Outlet from Nuveen Real Estate for £600m. The acquisition represented the largest deal in the sector since 2014, when Landsec paid £696 million for a 30% stake in Bluewater Shopping Centre.
Shopping centres have been the most severely impacted by the uncertain headwinds in the market, however even this sector has seen some movement. Recent deals include Eurofund Group and Henderson Park’s acquisition of Silverburn shopping centre in Glasgow for £140m as well as Landsec’s acquisition of an additional 25% share in Bluewater for £172m. These deals have reflected a return of appetite in the sector, helped in part to the perceived value in retail when compared to other asset classes.
As long as the latest Covid-19 variant does not trigger 2021-style lockdowns, evidence seems to suggest that 2022 will bring the return of investor appetite to the retail market. Bring on the new year, and best wishes to you all for a prosperous 2022!