Retail: No alarms and no surprises. Please.
A more benign, lockdown-free environment in 2022 will enable the Retail sector to continue on its long road to recovery.
11 January 2022
If 2021 was all about re-opening, the retail landscape in 2022 (and beyond) will be defined by a number of other important “Re-s”. Retailers themselves will have a busy year ahead as they work through a number of operational issues.
The thorny issue of rent arrears will be come to the fore ahead of the lifting of the moratorium on forfeiture in March. Appropriate compromise solutions reached between landlords and tenants, with limited recourse to arbitration. A foundation for a more collaborative relationship going forward. Supply chain challenges will remain: how best to counteract both short-term issues (e.g. rising prices, stock shortages, lack of HGV drivers) and far deeper long-term challenges (e.g. consumer demand for ever shorter online lead times versus product provenance and wider ESG concerns).
For retail assets, 2022 will be a year of re-basing and re-pricing. We predict a bottoming out of the significant rent and capital value corrections of recent years to create both a more sustainable retail market and a more compelling investment case for the right retail stock. Indeed, drastic price revision has already made retail increasingly good value versus other property investment classes. Yields have started to compress in retail warehouses and foodstores, and we predict that better quality high street and shopping centre stock will follow suit in 2022.
Calls for the re-purposing of retail stock to other uses will be no less shrill. However, we predict that repurposing will gradually become less of a knee-jerk reaction to a Covid-driven fall-out, and become a part of more thoughtful, long-term regeneration projects designed to redress property uses within a town centre (with retail sometimes reducing to a supporting rather dominant role).
2022 will definitely be a more stable year for the retail sector, but the “back to pre-pandemic levels” narrative falsely assumes a return to a normality that doesn’t exist. The high street is not dead, but it will continue to evolve. Unwelcome as it was, Covid was no more than a stage of this evolutionary process.
