What next for retailer costs?

We keep hearing that the economic recovery is driven more by exports and manufacturing than consumers but retail property markets are starting to look more interesting and, in some cases, more active too.  Retailer demand is still cautious but now reportedly increasing for example, while retail investment in Europe is up 48% this year compared to 10% for offices.

The findings of our latest global research also makes for encouraging reading (download Main Streets Across the World 2010). Global rents were down but much more stable than in 2009 and an increasing number of locations are seeing positive growth – led by Latin America and Asia but with core European markets also turning the corner.

Retail Rental Growth – Getting back to business?
Global rents down 1.5% in the year to June versus a 6.4% fall to June 2009
Retail Rental Growth – Getting back to business?
Cushman & Wakefield, European Research Group

An end to rental falls will not be welcome news to retailers looking to expand of course but finding the quality space they want is difficult anyway and not getting any easier with less new development underway. More merger and acquisition activity may be one way forward but the focus on quality will continue and weaker locations, properties and traders face more tough times.

What’s more, in a low growth environment, retailers aren’t expecting fast turnover growth and will be wary of increasing costs. The fashion retailer Next warned of cost pressures to come in their interim results (click here to access Next results) and interestingly have identified a possible capacity shortage caused by factory closures in the recession as a key cost push.

Next point to cost management as well as innovation as key to success and property providers would be wise to listen to this– and not just sit and hope for a supply-led squeeze to deliver future rental growth.

David Hutchings,
European Research Group,  London

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