Where to for retail and leisure property?
P-THREE was out in force at the 2023 Completely Retail Marketplace & Revo Conference. This event, held for some time now in the City of London [City futures article here], works particularly well, seamlessly blending networking opportunities with market insight. The record attendance this year suggests others agree.
My key takeaway at this year’s event was there appeared to be a realistic understanding by all parties of the stage we have reached in the rebased retail market. As a result, having been through a prolonged period of structural change and realignment, it is now possible to develop a roadmap to move forward in many places.
My key takeaway at this year’s event was there appeared to be a realistic understanding by all parties of the stage we have reached in the rebased retail market. As a result, having been through a prolonged period of structural change and realignment, it is now possible to develop a roadmap to move forward in many places. While there continue to be significant challenges ahead for the sector, there was nevertheless a sense of positivity, particularly in key market segments (see below).
What else did we pick up at the event? Here are a few key thoughts:
Some occupiers are in fine health. This was particularly evident in the following sectors: foodstores, quick service restaurant brands, value retail, coffee shops, vehicle charging operators, leisure, gyms and hotels, with many taking their own stands. We expect to see activity in all these occupier types for the foreseeable future.
Super prime destinations in hot demand. A lack of voids in supercharged centres like Lakeside, Liverpool ONE, Westfield Stratford, Meadowhall and The Trafford Centre raises the prospect of two things: firstly, a shift in favour of landlords in leasing negotiations and secondly, rental growth. While the latter has been long-awaited, 2023 might provide the first evidence of non-isolated examples, albeit limited to these super prime hotspots.
Retail parks show remarkable resilience. With typical voids no higher than 1-2%, the out of town market is performing in a way many High Streets can only dream of emulating, although asset management initiatives can be challenging due to such low void rates.
High Street advocates are out in numbers. And they come brimming with plenty of new and innovative ideas for tackling struggling High Streets. Once such organisation present was the Greater London Authority with their Property X-Change network which aims to bring diverse voices together to create thriving high street property that works for all Londoners.
Local authorities in the spotlight. A dedicated public sector hub was busy throughout the day, with local authorities keen to be seen and engaging with the market.
Expectation for capital contributions is unabated. Leisure operators in particular, whose capex requirements are often far greater than retailers, continue to press landlords/investors for payment share, but I sense that, especially in super prime locations (see above), such incentives will be harder to get.
Our sentiments regarding the occupational market appear to be reflected in the investment market where there is emerging evidence that there will be increased investment activity occurring over the next six months in the super prime market.
Right now, P-THREE has a very clear sense of where retail and leisure property is heading as we look into 2024 and beyond. One thing is certain: location and asset specific knowledge will always have greater value than generic data.
Article by the P-THREE Team
