Retail resilience tested by Internet shopping growth
Date : 09 February 2012
UK Retail Report from Knight Frank shows that prime retail continues to perform as the High Street faces up to a tough future while internet sales go from strength-to-strength:
- The worst forecasts for UK Christmas trading failed to materialise
- Knight Frank retail report highlights that consumer confidence remains fragile
- Mary Portas’ review reignites the empty shops debate
- UK retail development pipeline looks limited for the foreseeable future
Investors continue to seek out prime retail opportunities despite the significant move towards Internet shopping in the past 12 months, according to Knight Frank’s Retail Report. The most successful retailers have found the right balance between the traditional high street presence and ‘click and collect’ services, which are now viewed as integral to retail survival strategies.
Darren Yates, from Knight Frank’s research team and author of the retail report commented: “The prime end of the retail market has remained remarkably resilient in the face of significant economic challenges and structural change. The major regional centres continue to see solid demand and minimal voids but the contrast with some weaker towns could not be more stark - particularly those in the Midlands and Northern England struggling with 20 to 30 per cent vacancy rates.”
The Internet – which is helping to reinforce this polarisation – again recorded very strong growth in 2011 and now accounts for 10 per cent of total retail sales. Mobile commerce has come of age, with the use of wireless hotspots doubling in 2011.
“For some retailers, it is clear that growth in internet sales has come at the expense of store sales, although those retailers who are addressing this with click and collect strategies are obviously weathering this sea change better than those that have yet to create a compelling bridge between high street presence and online.”
Q4 saw a smaller number of retailer casualties than previous years but slower economic growth and rising unemployment point to a further erosion of consumer confidence, according to Knight Frank’s retail research. “Many retail landlords will be waiting with baited breath for potential tenant failures in the coming weeks and months”, said Yates.
“Mary Portas’ review of the future of the High Street has brought the “empty shops” debate into sharp focus but the reality is that it is a long term, structural problem to which there is no easy answer. Tackling it will require close cooperation between retailers, landlords and local authorities, in order to overcome change of use, funding and site assembly issues. However, the fundamental message coming from many retailers is that they want bigger and better stores - albeit in fewer locations.”
Despite the high vacancy rates in many towns, there is arguably still a shortage of supply of good quality space of the “right” size and configuration in some areas, with little new space coming through. “No significant schemes are scheduled for 2012 and a limited number are expected in 2013. It is difficult to foresee a pick-up in retail development activity until at least 2014”, said Yates.
In the investment market, the flight to quality has continued. Bruce Nutman, head of retail investment at Knight Frank said, “Investor demand remains sharply focused on the better quality assets across all the retail sub-sectors and, with a limited supply of product on the market, yields at the prime end should hold firm. For high street property, London and the stronger market towns in the South East, in addition to select market towns with good catchments around the UK, will continue to see a solid level of interest, notably from the UK institutions and overseas investors”.
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Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 242 offices, in 43 countries, across six continents. More than 7,067 professionals handle in excess of US$817 billion (£498 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit www.knightfrank.com.