Retail property markets in London and south east buck trend, study finds


Retail property markets in London and the south east continue to buck the wider negative trend and are relatively active, although occupier demand in the UK as a whole is weak as retailers continue to streamline their portfolios and focus attention on their profitable stores, according to the latest research by property firm Knight Frank.

A notable trend in the occupier market has been retailers ‘right-sizing’ their portfolios, particularly through the implementation of CVAs. 

In terms of rental trends, the market remains highly polarised, with central London being one of the few areas witnessing any upward pressure on rents. However, elsewhere, the story remains less optimistic.

Knight Frank research shows the 2013 shopping centre pipeline is showing only limited signs of improvement and development activity is unlikely to pick up significantly before 2015 at the earliest.

Ian Barbour, partner, head of retail development, Knight Frank, said: “Whilst limited new space is forecast for 2012, with no significant schemes expected to be delivered in the second half of the year, we are beginning to witness renewed development activity in the retail, leisure and food store sectors in the stronger cities and market towns throughout the UK.”

Investor sentiment continues to shift against most off-prime locations or stock with occupational issues, said researchers. This has translated into reduced investment activity, with overall retail transaction volumes down by over 50% in H1 2012 compared with last year.

Bruce Nutman, partner, head of retail investment at Knight Frank, said: “Despite the recessionary conditions, the market still exists for properly priced retail assets. ‘True’ ERVs are the key drivers for buyers but we anticipate more activity on the buy-side across the sub-sectors in Q3 and Q4.”