The last 18 months has been an especially challenging time for the retail sector. High inflation rates and the increased cost of living have caused many to cut their spending, and that has had repercussions for retail property occupiers and owners.
Now, the market is stabilising and there are more positive signs on the horizon which indicate that the worst is likely over, and the retail property sector can look forward to a more positive future.
Inflationary pressures are easing and consumer confidence is increasing as a result. Whereas June 2022 saw the beginning of a trend for people buying less on average, the latest figures from the Office for National Statistics (ONS) show that this has turned around.
Year-on-year retail sales figures increased by 5.1% in March 2024, suggesting that the market is close to addressing the imbalance between the price of goods and how much consumers get for their money. This is the key factor in consumer confidence and can also be measured anecdotally – everyone knows when they are getting more or less in their basket than previously.
As footfall increases, the retail property sector strengthens and grows.
That perception is all important. When people feel they are getting better value, they are more likely to go to the shops.
With this in mind, it is highly positive to see reports from Savills that average footfall levels in shopping centres and on high streets have stabilised. This proves that the underlying numbers recorded by the ONS are accurate, and should provide retailers with both comfort and confidence moving forward over the rest of 2024.
There are signs that retailers are taking this on board, too. The Royal Institution of Chartered Surveyors (RICS) notes that demand for retail property improved by 8% over Q1 2024 – a reverse of the trends we saw last year and a sign that consumer confidence is beginning to convert into solid real life trends for retail property.
Returning to the latest analysis from Savills, this sentiment has also led to a slight increase in rents on new deals in both shopping centres and on the high street. That is growth compared to last year and also compared to pre-Covid levels when it concerns new deals.
Sam Arrowsmith, Director of Commercial Research at Savills, said: “On a year-on-year basis, headline and net effective rental growth hardened significantly in Q1 2024.”
This suggests that competition has returned to the market and that tension is pushing rents higher. This is a great sign of a healthier market and the numbers suggest that well-occupied locations such as the Brunel Shopping Centre in Swindon and North Point Shopping Centre in Hull which see millions of visitors each year will continue to be the property of choice for retail operators in the future.
Q2 2024 looks like it could be an ideal time for retail companies to expand. Footfall has stabilised and retail property to rent in established locations is set to keep growing in popularity among both shoppers and operators.
Due to the growth of the retail sector, we have observed a trend among our current retail occupiers: improved trading performance at our locations is leading them to upsize their spaces and reevaluate their growth strategies. This underscores the increasing demand for retail space and highlights the importance of understanding current supply and demand dynamics.
Looking to lease new retail property? We have shopping centre space to rent and high street retail units to rent – browse our portfolio today and get in touch with the team to learn more.