Retail back in the spotlight
#Week38 saw the real estate world’s attention turn once again to retail, with two events that were both realistic about the challenges the sector faces while being optimistic about the opportunities that the future holds. In the same week it was revealed that CBRE is looking to buy specialist shopping centre asset manager Sovereign Centros, there is a growing feeling of a corner having been turned.
First up, on Wednesday morning, was a pre-MAPIC networking breakfast at The Royal Exchange in the City of London, organised by Innesco in our role as the official communications advisor to the conference. After introductions from Francesco Pupillo and Daniel Cook of MAPIC organisers RX, and Andrew Hilston of The Royal Exchange owner The Ardent Companies, a diverse panel of landlords and occupiers, moderated by Innesco’s own Dan Innes, cast their eye over the retail market.
With contributions from Sandi Danick, head of leasing at the American Dream mall in New Jersey and senior vice president of Triple Five Group, Alberto Esguevillas of Eurofund Group, Michael Matthews of Lucid Motors and Kirsty Garrett of The Crown Estate, the overriding sentiment was one of optimism around the innovations being seen and the ongoing possibilities that retail presents. With MAPIC just two months away, the positivity set a pleasing tone that can be expected to continue when the sector gathers in Cannes. As ever, it promises to be a must-attend event for anyone even tangentially connected to retail property.
The Innesco team was also present the next day for the Local Data Company’s H1 2023 Retail & Leisure Trends Analysis launch, something that has become a vital part of the sector’s calendar. The rigorous analysis once again painted an honest picture of the state of the market – independent retailers in particular are struggling, despite beneficial changes in the business rates environment – but was equally effusive about areas that are showing reasons to be cheerful.
Retail parks, convenience and health and beauty are all growing areas, and redevelopment projects are taking shape as investors grapple with shaping their assets to provide what people actually require. Vacancy rates for both retail and leisure have stabilised, and while total units has declined, this in itself is a reflection of the 27% increase in demolitions as repurposing schemes are increasingly enacted. There remain huge challenges in many places – the event panel was at pains to emphasise the importance of location in retailers’ decision-making – but the overarching feel is of a sector that increasingly knows how it is going to deal with the issues it faces.
It has been some time since retail was top of investors’ wish lists, but it is becoming ever clearer that much of the doom around the sector was overdone. Trends that were deemed to be permanent during the pandemic – the inexorable rise of online, for example – haven’t turned out as predicted. There is a clear demand for physical space, and while some locations are ‘over shopped’, innovative solutions and alternative uses are being found. Food for thought as MAPIC approaches.