CBRE Releases Latest UK Retail Briefing
London, 27 October 2009 – CB Richard Ellis (CBRE) today released a new research report on the UK retail market. The report covers key trends in the occupier, investment and development markets in 2009.
Ciaran Bird, Head of UK Retail at CBRE said 2009 had been a difficult year for retailers, and whether next year will be any easier is still open to debate.
“In 2009 retailers have recognised the need to adapt to the challenging market conditions, cutting costs with adjustments to the supply chain, reducing stockpiles, staff reduction, discounting and the shedding of poor performing stores. There are positive signs of strength in the market with a number of the fashion, discount and food retailers performing remarkably well,” he said.
Key highlights from the report include:
• Economic Trends - the pattern of retail sales during the early 90s recession suggested that households cut back on discretionary expenditure and maintained non-discretionary expenditure. This time around the pattern is not as clear cut with non-food stores, clothing and textile retailers in particular still showing signs of annual growth.
• Retailer activity – the current downturn has seen a number of ‘smaller’ retailers fall into administration only to reappear under a new corporate identity minus the debt and poor performing stores. Administration levels have generally been lower than expected and dipped significantly after a peak in January. The next key period will be post Christmas when it is anticipated that there will be a rise in administrations.
• Development Pipeline – there has been a major decline in development activity for shopping centres and retail warehouses with construction activity levels having halved since 2007, a rate of decline similar to that recorded at the time of the early 1990s recession.
• Completion levels for shopping centres during 2009 are likely to be around 3m sq ft. Many schemes have in effect been parked indefinitely whilst other have been pushed back. A positive aspect of this is that there is not the over-supply that dogged retail property markets in the mid-1970s and again in the early 1990s so the recovery phase once growth resumes would be expected to be a lot shorter as a result.
• Investment - despite confidence returning to the market, transaction volumes remain at low levels and the lack of available prime stock will limit growth for the foreseeable future. Lack of liquidity and prudent lending are key facets of the current financial market influencing investment activity. However, for grocery store investment, the covenant strength combined with long leases has meant that there are currently in the region of 20 bids for each store asset up for sale.
• Retail Property Performance – yields for all prime retail asset classes now appear to have stabilized and have hardened for retail warehouses suggesting that a degree of confidence has returned to investment markets.