Around the world you can hear stories about hot retail investment sectors, with new malls being built and rented out by the handful in the likes of Turkey. Even in America there are still plenty of mall developments being reported. But in the UK only one new mall is to open this year. Sure, Turkey is a rapidly emerging market with ferocious consumer growth and America is much bigger than the UK but it is more than that; there is a clear shift in the UK as more of us do more of our shopping online, leading to growth in the online sector while the high street continues to wean.
Yes, the shift to online is a global change, but in the UK it seems more pronounced at present. This is because of the massive amount of store closures witnessed during the crash. The fact that many of the stores closed during the financial crisis have yet to find new tenants is testament to the changing face of UK retail, but it is also a factor in advancing the trend – with less shops on the high-street there is yet more choice to be found online.
Britain's largest listed property company testified to changing trends recently when it announced a deal with internet giant Google aimed at driving people back into its malls. The deal was a tie-up with Google product search, which allowed people to see online that their products were in stock at their local mall. According to Richard Akers, managing director of retail at Land Securities, the deal taps into the changing habits of mall visitors.
"They will know they can get what they want and plan their day around a meal and a trip to the cinema," he said.
Land Securities announced the Google deal along with a trading update revealing that number of its retail units in administration - including Jessops, HMV and Blockbuster - rose from 1.8pc at the end of September to 2.2pc.
This could be worrying as the firm prepares to open the UK's only new mall this year the Trinity Leeds in March, but according to the firm it is 90pc pre-let. Land Securities Chief Executive Rob Noel said he was confident of success despite the weak retail climate.
"Retail is not dead. Retail is changing," he said. "There are 60 million people in this country that need to eat and wear T-shirts, and they have to get them from somewhere."
Against the backdrop of a growing number of retail failures, the British online market grew 14pc in 2012, according to online retail industry body IMRG, which forecasts 12pc growth to £87bn in 2013.
The message coming from UK retailers is no longer questioning whether online is or will become dominant, or even asking what can be done to stem the flow, but increasingly a message of acceptance and adaptation are shining through.
Some property companies were cynical about online, but more are taking their first steps get in front of the changes," said J.P. Morgan real estate analyst Harm Meijer.
Retailers increasingly view their stores as showrooms where customers can see and touch items they prefer to buy online, Meijer said. "That means landlords will have to think carefully before linking rents to turnover as they commonly do."
The growth of online retail is not only appealing for consumers but for businesses as well. Consumers get more choice and can easily shop around for the best prices (prices which are often cheaper than on the high-street anyway), which businesses get to swap their expensive high-street premises for cheaper warehouse spaces. Fully capitalising on online sales often requires a big investment from the firm, but this investment is often a big initial outlay followed by a much more streamlined and cost effective business.
Not that they have any choice in the matter. UK consumers have awoken, either through choice or by necessity to the vast and wonderful world of internet shopping, and this is a genie that cannot be put back in the bottle.
- Tuesday 05 February 2013