Retail: the major trends for the future

Tim Harrup

Real Estate advisor Retail Cushman & Wakefield has produced a report which analyses the direction in which the retail segment is moving, in light of the upheavals cause by factors such as e-commerce and Covid. It has concluded that there are a number of major trends in place or emerging, which are set to change the traditional retail landscape.

First of all, C&W expects to see a move to closer partnership between retail property owners, retail occupiers/operators and public authorities. Where this last category is concerned, they should be part of the discussions to ensure a perfect commercial mix within a specific area, but also to (re-)develop the public realm and reinforce accessibility and attractiveness.

On top of this, and indeed as part of this, and as is the case with other real estate segments, sustainability is now a ‘must-have’ and overcoming the sustainability challenges in operating retail spaces will require joint working on a scale previously unseen between landlords and occupiers. Where both are targeting Net Zero Emissions, as they should be, it is imperative to understand, C&W points out, who is responsible for what and who should pay, but ultimately that a joint approach is a win-win for all parties in the long run. Environmental certification and circular economy are now Unique Selling Points, both for landlords and retailers. These factors are also expected to have a profound impact on the future rental levels of a store.

Thirdly, following an extended period of relative gridlock in the capital markets, C&W forecasts a return of retail investment liquidity, saying that 2022 looks to be the first more normal year since 2018. The exceptional year observed on the occupational market in 2021 should reinforce investors’ confidence in retail assets as latest figures confirm that physical retail is here to stay. More investments are expected on the retail market, especially from the second part of 2022. Remaining with the financial aspect, C&W says that capital flows will continue to aggressively target selected sectors of out of town retail. It believes that
habits learnt and adopted during the pandemic will linger and become embedded in shopping patterns long after the pandemic has passed. Investors will continue to shape their strategies around these changing demographic and shopping patterns.

Moving on to a phenomenon which has been uppermost in the minds of shopping centre and retail park operators for some time, C&W speaks of the realisation of the mixed-use destination in repurposing retail. For many years, it says, we have had commentary on the requirement to repurpose ‘retail’ spaces into alternative uses. With the impact of current and projected increasing vacancy rate due to the diminution of physical retail space demand, the economic imperative to reposition and repurpose is now top of mind.

C&W goes on to say that historic efforts to reposition and revitalise shopping destinations have focused on increasing the proportion of Food & Beverage and leisure in order to increase time spent by consumers and attract alternative customer segments. But this type of mixed use is now set to be enlarged, and what C&W expects to see is the creation of a full mix of complementary uses which may include healthcare, education and other functions alongside the traditional traffic drivers of retail, F&B and leisure. This type of mix is stated to be how the real estate advisor sees the best destinations evolving over the next year and beyond. And of considerable importance in this is the fact that these adaptations are also essential to drive the rental levels. It looks evident that the best retail locations and/or the best units will succeed in stabilising their rental levels compared to 2020 while the others should fear further rental decreases in the coming months