Perspectives Predictions: slow but sure progress for 2023

One of the key post-COVID learnings for the commercial property market as a whole, and the retail and leisure sector in particular, is that the operating environment has become anything but predictable. Nevertheless, we believe that some trends are discernible, so we are (bravely or foolishly – you decide!) presenting here our choicest reckonings on how the market will shape up in 2023, accompanied by our regular caveat that these are predictions and not projections! We’ll be following up on many of these themes in forthcoming Perspectives, so check back here regularly. In the meantime, your feedback on all/any of our predictions is most welcome; do feel free to contact us at hello@p-three.co.uk, call us on 020 7101 3151 or message us at www.twitter/tweetpthree.

…while the cost of logistics space continues to rise, more favourable rents and rates for retail property will help to reinvigorate physical shopping…

Hannah

• Shoppers return to physical stores – rising delivery and return costs (a representative cost to the shopper for returning an item to a mainstream retailer is currently around £2.00), will be one of several factors encouraging consumers back into bricks and mortar outlets.

• More new stores, but at a slower pace – the return of shoppers to physical stores will buoy retailer sentiment, but headwinds such as energy and wages costs, reduced customer disposable income and harder currency plays (for example, the dollar/pound exchange rate, previously buffered by hedging, is now starting to bite) will kerb appetites for retail store expansion to standout lucrative locations.

John

• Lower property costs for retailers – while the cost of logistics space continues to rise, more favourable rents and rates for retail property will help to reinvigorate physical shopping. However…

• Retailers must remain vigilant – one of the key balancing acts in retail is maintaining inventory at optimum levels and this is likely to become harder as strikes, extreme weather events and the on-going cost of living crisis could lead to a build-up of unsold stock. As inventory directly impacts profitability it might in turn slow store expansion plans.

Justin

• Community to the fore for mixed use – the spotlight will shine on more inclusive community engagement from the outset for true mixed use developments, with ‘the 15 minute neighbourhood’ following on after. This reflects societal trends such as a longer term commitment towards more flexible working, national and local government regulation aimed at creating more sustainable cities/transport policies and the consequent rise in importance of micro markets.

Kate

• Central London F&B action is back – F&B operations in the capital’s core geographic markets were hit hard by COVID, but are finally bouncing back. With the West End already seeing some operators reporting sales 6% ahead of pre-pandemic levels, we see the City of London following suit, with vacancy rates likely to reduce rapidly in the first part of the year, although this is partly dependent on a resolution to the long-running series of rail strikes, which is hitting sector operators in the capital hard.

• Value for money will be key for F&B success – as consumers feel the pinch in their purses and wallets, they will be very selective when deciding on what to do in their leisure time. Whether it’s a date night or day trip with the family, it must offer good value for money, while not compromising on quality. Those providing overpriced meals or poorly executed leisure activities are unlikely to survive.

Michaella

• Pop-up shops will bring exciting animation – although younger consumers are more digitally focused in their shopping habits, they are equally responsive to new and innovative shopping experiences. The benefits of pop-ups to retailers remain (exposure to new markets at minimal risk and the potential for digital start-ups to segue into a bricks and mortar presence), but also have value for locations as they draw new consumers, to the benefit of surrounding retailers.

• Restaurant operators to spend more time on socials – restaurants will adapt and leverage their positions on social media through new channels such as TikTok and Instagram Reels in order to drive their brand awareness and ultimately popularity. At least this path has already been trodden by retailers, the savviest of which provide useful examples of best practice.

Raquel

• Oxford Street is 2023’s come-back kid – with plenty of lettings in the pipeline, business rates finally reduced (from April) and Crossrail now factored into customers’ journey plans, the long-awaited renaissance of a global shopping destination will become a reality.

• Retail brands are no place for greenwashing – as shoppers demand increasing clarity on brands’ green credentials, retailers will come under increasing pressure to demonstrate that their ‘eco’ claims hold up to scrutiny.

Thomas

• Best in class assets will shine – throughout the second half of 2022 interest in prime retail/leisure property rose, particularly in Central London, where there was often competitive bidding by restaurant and leisure occupiers – a feature likely to be even more pronounced in 2023. The challenge for landlords, investors and developers will be ensuring their assets stand out from the crowd.

• f-hubs to gain mainstream recognition – more F-hubs will open in 2023, though net provision is likely to balanced by existing foodhall operations failing where they lack a USP, are situated in the wrong location or have a poor offer. This market will noticeably consolidate, both in the UK and globally.

And finally... some non property-related predictions:

* England will recover the Ashes.

* France will beat New Zealand in the opening match of the rugby world cup in Paris on September 8th and a northern hemisphere country will go on to win the tournament. (This is a particularly brave call from Justin, we feel!)

*Thrifting Reels will be all over Instagram, as the nation’s shoppers get creative at saving their pennies.

*Big boots are back. Think black with a huge chunky heel. This could boost retail spend but might reduce the number going to the gym as just a walk around the block proves to be the ultimate workout!

Article by the P-THREE Team

Photo credits: Unsplash