Amazon and Asos will be on the high street in eight years’ time, according to a leading commercial property firm.
Commenting on figures released today by property performance analyst, Investment Property Databank (IPD), which found shopping centres were 38.4% below their pre-recession values, Guy Grainger, head of retail at Jones Lang Lasalle (JLL), said: “With a period of flat sales growth it’s vital investors pay attention to how much debt retailers have. Peacocks was a fundamentally sound business, but the debt dragged it down.
“The UK consumer has totally adapted to online retailing and we have more online sales than France and Germany added together. But online is not the Holy Grail and the property sector is not going to be killed by online – quite the opposite. A property strategy linked directly to online strategy is the key ingredient.
“Purely online retailers will have more impact with a multi-channel strategy and I certainly believe it won’t be long before ASOS and Amazon have a physical presence.
“The future could be mixed for fashion retailers though. The nation is getting older and by 2020 there will be 15% few 18-25 year olds, so the very congested fashion sector, which has been driving rents for some time, won’t have as many customers.
“However, in the short term, inflation on food and cotton is coming down, so for the rest of the year retailers should be able to protect their margins.”
The UK retail sector has seen a fall in capital values of 31% since June 2007 and decline in rental values of 8.3% over the last four years, according to IPD’s Q1 report.
Central London was the only UK retail region that saw positive capital value growth during Q1 March 2012 – everywhere else saw value decline, IPD said.
Shopping centres (including both in and out of town) have declined in capital value by 38.4% since 2007, according to IPD.
However, when shopping centre statistics are broken down – out of town shopping centres have performed relatively well, with values recovering to within 22% of their pre crash levels, said IPD. Rental values have only declined 4.7% during the same period.
In-town shopping centres have seen the steepest decline (of any retail segment) with values now 41% below 2007 peak. This is partly due to their age and to a lack of investment into the sector, said IPD. Around 71% are over 20 years old and increasingly obsolete. Rents over the last five years have declined by 13%.
Greg Mansell, senior researcher at IPD, said: “The retail sector has been the worst performing property sector in the UK over the last year, but these figures are a warning sign to investors not to abandon the retail sector. It is still the largest sector in the UK property market, and investors need to take more notice of their allocations and liabilities, and how these interact with the changing nature of the market. A retail renaissance is needed, not an exodus.”