David Erwin, capital markets group chief executive and chairman of retail, Cushman & Wakefield
It was longer ago that I am happy to admit when I spent a great couple of months at Insead Business School in an attempt to drill into me some of the basics of sound business.
Some of what we crammed has been forgotten but a few key principles have stuck. Perhaps the most important thing I learned was that businesses can really only differentiate themselves by focusing on marketing their brand and constantly innovating.
Seldom have those edicts been so readily applied to the retail sector as it finds itself contemplating the year ahead.
Leading the charge for the optimists are the twin benefits of a benign interest rate environment and falling costs, largely on the back of a shrinking oil price. The net result is that consumers should have more disposal income. Add to that the benefits of the effluxion of time – not to be underestimated – which has allowed rents to be rebased and moved us a stage closer to sustainable incomes across the sector.
The pessimists, on the other hand, will counter with the ongoing and not yet fully understood effects of online shopping, a mixed set of Christmas results following the UK’s slavish adoption of Black Friday, some ongoing casualties among the operators and a collection of grocers which are rather less fresh than many of their products.
My experience is that the REITs have carried out more research into the future of UK shopping than anyone else. They, for the most part, seemed to have reached consensus which bears out what we are seeing in our day-to-day operations. Physical shopping now seems broadly split into three key elements – luxury, experience and convenience – all augmented to a greater or lesser degree by some form of online symbiosis.
So against that background, who or what are the winners and losers for 2015?
For us, the winners are:
- London – the golden retailing times will continue, supported by continued tourism and special events such as the Rugby World Cup and some left-field new locations to entice intelligent shoppers.
- Uberprime – really big dominant schemes will outperform across the UK, although there might only be 10 of them.
- Retailers on top of their game will continue to increase market share – there is definitely the good, the bad and the ugly out there. There should be a rise in independent retailers, starting in London.
- Iconic towns and destinations will once again rise to the top of the retailing hierarchy, with cathedral cities and genuinely strong market towns outperforming.
- Convenience and click-and-collect will form a strong double act and could help community retail gain momentum.
- The global trend will strengthen both in terms of occupiers and investors – the UK remains on all radars.
The losers are pretty clear – secondary retailing space without a purpose, redundant malls with significant outgoings, the grocery sector in the short term. Weak high streets outside the major centres, which are probably twice as long as they need to be, will continue to struggle, although we are seeing signs of life where supply and demand have come closer together.
Retail’s resilience is part of its trademark and we remain a nation of shoppers, if not shopkeepers.
Things won’t stand still for long so as technology drives, real estate adapts. Plus ça change.
