As we move into Q3 2024, the retail property market continues to show signs of recovery and keep the positive trend we observed in Q2 2024 Retail Property Forecast. The challenging period of rising inflation and living costs seems to be easing.
In our previous forecast, we noted that inflation-related pressures were easing while consumer confidence was increasing, with retail figures showing a 5.1% year-on-year increase in March 2024. This positive state has continued forward into Q3, offering opportunities for investors, property owners, and businesses.
We will explore how the stabilisation of footfall levels in shopping centres and high streets from the previous quarter has developed and what new opportunities and challenges there are for anyone who is looking for a retail space for rent.
Table of contents
Current Retail Market Trends
Q3 2024 Forecast
Why invest in retail property now?
Rising Opportunities in the Retail Property Market
Current Retail Market Trends
Data source: CBRE UK Economic Outlook Q3 2024
Consumer behaviour is changing, with retail sales showing mixed results. Looking at CBRE’s report, even though retail sales grew 2.9% in May, overall growth since the start of 2024 has been just 0.7%. This is because of the poor weather conditions affecting consumer activity. Yet, consumer confidence remains trending upwards, which will benefit consumption. There's also a growing interest in prime locations, with London high street retail and retail parks seeing increased attention (Abrdn, 2024).
That means that even though retail sales have been a bit uneven this year, there's a chance for improvement as consumer confidence grows. If you’re considering renting a retail property, focusing on popular areas like London high streets and retail parks could be beneficial. However, you should take into consideration the higher costs associated with these areas. Shopping centres and high streets will be significantly cheaper. Consumer confidence is growing, therefore high streets and shopping centres even though cheaper will end up with potentially similar customer spending. In short, being in the right location could give your business a significant boost.
Q3 2024 Forecast
According to Savills report, for the first time since 2017, all main MSCI average rental growth indices are showing positive year-on-year rental growth, including in the retail sector. It indicates that rental values are increasing across the board, which could mean higher returns for property owners and investors.
For businesses looking to rent retail units, this trend suggests that rental costs might be on the rise, so securing a lease now could be advantageous before prices go up further. Overall, it’s a sign of a strengthening market and improving conditions for those involved in retail property.
Why invest in retail property now?
With consumer confidence at its highest since November 2021, people might be more willing to shop. Also, household savings have increased, which means people have money to spend if they choose to. That could lead to more demand for retail space to rent.
The rise in spending could increase demand for retail space further as more businesses look for locations to attract customers. For property owners and investors, this is an opportunity to capitalise on the growing interest and potentially increase rental income. Again, this means higher rental prices to match the growing demand. Therefore, by securing space early, businesses can lock in current rental rates before they go up, saving money and gaining a strategic advantage.
Interest rates were expected to start falling in August 2024. On the 1st of August, as predicted, the Bank of England cut interest rates for the first time since 2020. For businesses looking for shops to rent, it’s good news. Lower interest rates mean that this could be an ideal time to secure a loan or renegotiate terms. It also gives a more favourable economic environment, which can improve overall business confidence and stimulate further growth in the retail property market.
Rising Opportunities in the Retail Property Market
Q3 2024 seems like an ideal time for retail businesses to expand. Summing up the above findings – inflation and living costs are easing, consumer confidence is on the rise, retail sales showed a 5.1% increase in March, and the overall outlook is improving.
As we observe growing interest in the prime locations, rental prices rising for the first time since 2017, and interest rates being cut by the Bank of England, it is time to act for investors and businesses.
Choosing FI Real Estate Management for retail properties means partnering with a leading UK commercial property company. We have over 40 years of experience and numerous satisfied tenants across the UK. Our portfolio includes a different range of properties, including retail ones. If you’re looking for shops to rent, contact us to get valuable insights and advice on securing the best deals.