By Justin Taylor, Head of EMEA Retail
The type and hierarchy of retail floor space in the UK is a complex subject with layers of analysis needed to examine catchment, spending, competition, supply and demand and obsolescence. Right now, three factors are structurally reshaping the retail market. First, there appears to be limited positive news regarding the near-term economy for the consumer. Secondly, there are significant societal changes, such as more people living in large urban centres, people are living longer, the level of home ownership is falling and people are staying single for longer. Thirdly, there is the impact of digital, data and social media on all aspects of retail.
All of this is leading to a change in customer behaviour which will change the future characteristics of shops, likely to be focused on using shops as a place to exhibit the brand and as a marketing channel; a place with the potential to execute sales but that is not necessarily the primary purpose; and the brand increasingly will need to include services as well as products. There is evidence indicating that 80% + of all retail sales still touch the physical store, and hence, without question, bricks-and-mortar retail will continue to be at the cornerstone of the retail market. Retail sectors which appear to be performing the strongest are those which do not occupy the centre ground, but rather, have a compelling customer proposition based around value and fast-fashion, or alternatively customers are looking for a more immersive brand engagement with an aspirational or premium brand.
The question facing us is not as binary as to whether we have too much or too little floor space but rather whether we have the ‘right’ type of floor space in the ‘right’ location as part of the correct overall mix and an engaging place. It is a fact that London is under-shopped and locations such as Oxford and Edinburgh are demonstrating a clear demand for new retail floor space.
It is suggested that already in the UK, there may be over 100 shopping centres which are at best, in limbo or, at worst, falling significantly in attractiveness and value with 20% + vacancy rates. So, at the risk of making broad generalisations, over time it may be evident that the UK has 25-30% of the ‘wrong’ type of retail floor space in the ‘wrong’ location.
As Daniel Hurwitz, president and CEO of DDR, observes, “I don’t think we’re overbuilt, I think we’re under-demolished.”
It is, however, in these locations that there will be opportunity for town centres to regenerate with an ultra multi mix of uses, with limited amounts of retail floor space, but being places to work, play, stay, learn and eat. This world will have “co-mingling” at its heart, with common interests of the users, driven by shared experience around engagement, events, innovation, learning and education and a more integrated ecosystem than currently exists. Mono-sector retail will have increasingly less relevance therefore in many locations.