Retail property in the UK has experienced a fall in tenant demand, as well as negative rental expectations. The latest Royal Institution of Chartered Surveyors (Rics) UK Commercial Market Survey highlighted the rising level of unoccupied retail space and pointed out 28 per cent more surveyors now believe rents will fall rather than increase over the coming three months, compared to the responses received at the start of 2012.
Simon Rubinsohn, Rics chief economist, commented: "The retail property sector continued to suffer in the early part of the year with falling demand resulting in the continuing negative outlook for future rental values and activity." Earlier this month, head of retail consultancy at CB Richard Ellis (CBRE) Jonathan De Mello suggested reduced demand for space from stores could be part of a wider trend of consolidation within the retail sector. "The challenging economic conditions are only part of the story - retailers are also responding to the changes in shopping habits of the 21st century, time-pressured consumer, the rise of internet shopping and the expansion of supermarkets," he asserted.
Mr De Mello cited CBRE research, which revealed that in order to cover half of the UK's retail market, stores in just 90 locations are required, compared to the 200 units recorded in the 1970s. He concluded that "market consolidation is an inevitable part of the modernisation of the sector". From a property investment point of view, it will be the prime retail locations that continue to attract attention from buyers. Earlier this year, Darren Wright, from Knight Frank's research team, described this sector as "remarkably resilient", noting many of the major regional centres are performing well, with high occupancy levels and strong tenant demand. However, he highlighted the contrast between the prime markets and secondary locations, where demand is weak and vacancy rates are high.
- Friday 20 April 2012