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30th Anniversary Conference Presentations
2018: A Year of Distress
This, the first in a series of three SPR seminars focusing on the retail property market, was held on Wednesday, 18 April 2018 at Cushman & Wakefield, 125 Old Broad Street, London.
In the morning’s main presentation,
, Chief Executive at Retail Economics painted a fairly bleak picture of the outlook for the UK retail industry in 2018. For all the current improvement in real incomes, consumer confidence remains fragile and the propensity for discretionary spending weak. Meanwhile retail spending is getting more polarised, with food purchases holding up well, while other areas struggle. Add to this the cost pressures that wage growth and escalating business rates are placing on many retailers and it is not surprising to find margins under pressure for many. At the same time business models are undergoing structural change in the face of an ever growing share of sales taking place on line. All this, he suggested, means that 2018 looks set to be a “year of distress” for the sector.
, Head of EMEA Retail Research at Cushman & Wakefield, who also chaired the meeting, did not contradict this pessimistic assessment in his overview of key retail property trends in the UK and US. In a talk entitled “Shopping centres: How bad is it?” he emphasised the exponential growth in Internet sales, suggesting that their market share might end up as high as 40% in the UK. Although he does not believe conditions are yet as bad as in the US, where Green Street Advisors reckon 30% of malls are at risk of closure, 2017 was still a bad year for UK retailer failures, while a significant number of shopping centres are half empty, prompting thoughts of converting many to a wider mix of uses. Yates proposed that some may not even be called shopping centres in the future.
, F&B Asset Manager, British Land and
, Director, CBRE Global Investors, who spoke as panellists, sounded rather more upbeat in their comments, but agreed that down the line shopping centres would be less about the volume of goods leaving their doors. Keown emphasised that British Land is aiming to raise its share of sales from food and beverage from the present 11% to 15%, as well as increasing community links in many of its centres. Hunter stressed that investors need to understand the sea-change that has hit retail: For most mall visitors, shopping is no longer the same thing as buying, making experience and convenience key factors in a centre’s success.
Lim and Hunter agreed that the worst of retailers’ current travails may be over by early 2019. But that is likely to be cold comfort for many.