It is no secret that even prior to the arrival of COVID-19, the UK retail property market was, in some areas, experiencing significant difficulty. Friday 20th March 2020 will prove to be a defining date when the government asked restaurants, pubs, health clubs and leisure venues to close, indefinitely, thus placing even more pressure on an already stressed sector.
Sustained materialism and consumerism over multiple decades have fuelled retail floorspace expansion, with many households having so much ‘stuff’ they have also created a boom in the self- storage property sector.
At the same time, globalisation of the retail market with brands moving internationally has increased demand, which in turn has helped underpin continued rental growth. The positive attributes of globalisation, such as technological advancement, education and time and space efficiency, are now being challenged by the negative ramifications of globalisation such as global warming and the rapid spread of diseases.
The current pandemic will redefine most things, including the UK retail and leisure sectors, and how these markets operate in the future. It seems logical this pandemic will accelerate the speed of change that was occurring anyway in these sectors. It was a market that was over-spaced, increasingly over-priced, and governed in part by antiquated legislation and some market practices such as the rent review process, which can be inequitable.
We are likely to move quickly towards a market that is right sized in balancing demand and supply; occupational costs reduced and being aligned to store performance; more contractual flexibility with leases to allow more market movement; a requirement for greater active portfolio management from investors and occupiers, and potentially, new legislation. The level of social and corporate pain during this period will be unprecedented.
The current situation also highlights the benefits of a multichannel retail strategy underpinned by outstanding logistics. The spatial distribution of bricks and mortar convenience retail of the supermarkets and pharmacies has never looked more reassuring to customers than now, whilst also having the option of home delivery when being encouraged to stay at home.
This pandemic will also help crystalise the vital role town centres should be playing up and down the country, be they large or small, as being the beating heart of the community. Prolonged social isolation may profoundly change the way everyone thinks about, and engages with, their local community.
At P-THREE, we look at everything first through the eyes of people: the consumer. The current hardship for many is unbearable. We anticipate as things improve, to see more shifts in consumer behaviour towards building stronger communities with a clear sense of purpose, placing environmental, health and well-being at the centre of design, an occupational and investment preference for mixed use destinations including medical and distribution hubs, and a renewed emphasis on localism and provenance rather than globalism.
Amongst all the current distress, this could be an opportunity for the leaders involved in the UK retail, leisure and cultural sectors to rewrite the playbook for the forthcoming decades.