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The future of retail property and how we got here

Full report: What's happening to Retail Property?

The future of retail property and how we got here

The evolution of retail property and into the future

For much of the last three decades in retail, aggressive expansion of physical space drove market share as retailers’ key strategies involved ‘land grab’, while the broadening of the grocery sector into non-food proposition created even fiercer competition.

A rapid increase in stores across high streets and shopping centres ensued, as well as the development of larger ‘big-box’ stores, frequently located in out-of-town retail parks. In part, large chain retailers and landlords were able to turn to capital markets to fund extensive real estate build-outs, leading to the development of new shopping centres, retail parks and lifestyle centres, which added to and cannibalised the traditional town centres they encroached upon. 

Retail store front


“A rapid increase in stores across high streets and shopping centres ensued, as well as the development of larger ‘big-box’ stores, frequently located in out-of-town retail parks”

Retail in the last decade

Over the last few years there has been a reversal of many of these trends. This was a catalyst for consumers to start looking for cheaper alternatives at a time when improvements in technology brought-about heightened transparency in pricing, service and quality, and the discounters had a much firmer foothold in the market. The past decade has seen digital transformation pave the way for more sophisticated, multi-channel retail propositions, supported by an uptake in smartphone usage and online shopping, ultra-convenient same-day home deliveries and efficient click-and-collect. The value of online was estimated at £70.3 billion in 2018 and accounted for just under £1 in every £5 spent.

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This work forms part of a wider piece of research and is a downloadable in pdf format


The rise of the retail experience economy and its impact on UK stores

Another influential aspect of today’s retail market is the value of experiences, with positive retail experiences fitting into four key themes as defined by Retail Economics:
-    Entertainment
-    Education
-    Environment
-    Escapism

While consumers claim to spend more time browsing online than they do in-store, the importance in the discovery and research of retail products is more influential in physical stores, particularly flagship locations, so the onus is on experiences. Retailers and landlords are recognising the importance of experiences in three key moments:
-    Moments of discovery
-    Moments of desire
-    Moments of action

What’s more, shoppers expect digitally enhanced physical environments that offer experiences that cannot be replicated online. 

Store operating costs

Operating costs are another factor shaping the current composition of retail, with costs rising 10.8% over the last five years. Profit margins are under intense pressure and the trend is unsustainable. 

Figure 1 - Retail operating costs have risen 10.8% from 2014-2018


Consequently, this has led to a loss of over 7,000 stores up to 2018, increasing vacancy rates across high streets and retail parks, and a rise in Company Voluntary Arrangements (CVAs) in a bid for retailers to remain relevant.

The rise of online spending

As mentioned previously, macroeconomic factors, technology, the retail experience economy and increasing store operating costs are certainly key factors that shape retail property. However, shifts in consumer shopping habits are also critical, especially in these times. The customer journey has evolved considerably, thanks to technology, and this will only exacerbate how the role of the store will evolve in the future and how the rise of online retail will continue to grow – hence, its impact on the composition and characteristics of UK retail property. 

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Found this short article interesting?

This work was conducted by Retail Economics in partnership with Alvarez & Marsal. It looks at the role of physical retail space in the UK and the various factors that have shaped the direction of retail property in the past - and those for in the future. The research includes a consumer panel survey and focusses on how shopping habits impact stores (present and future) and the likely scenarios that retailers will adopt in order to cope with the structural changes occurring. 

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