The last week has been a bad one for UK retail, with two long established brands – BHS and Austin Reed – calling in administrators in as many days. The action comes after the end of a quarter which has seen a number of retailer profit warnings, including Next, which is expecting 2016 to be its toughest year since 2008.
Traditional retailers are facing challenges from a number of directions, including competition from discounters and deteriorating high street trading. The number of online shopping parcels arriving at Mayfair Capital’s offices each week, despite being a stone’s throw from Oxford Street, exemplifies the latter, and illustrates the extent of the revolution in the way that consumers engage with retailers.
Retailers need to respond to these challenges but many burdened by a high number of high street stores, like BHS, do not have the finances to enact the major changes required. In a year when even retailers such as Next that are considered well-capitalised and IT savvy have concerns, a number of retailer failures must be inevitable.
The recent failures may tell us something about the temperature of the retail sector and the wider economy but as property investors, what is more important is looking at what it tells us about how the way we shop is evolving and the drivers of this, whether technology or changing attitudes and preferences in our society. At Mayfair Capital we are using this research to build an understanding of the type of properties that retailers will want to occupy in order to meet the future needs of consumers. This enables us to target assets that we believe will see occupier demand being maintained and will underpin a sustainable and growing income stream for our investors.
There are a number of ways this is reflected in our strategy. Among others we have a preference for logistics as retailers are expanding their logistic footprints and we expect appetite from occupiers to remain for well-connected units, ideally in close proximity to urban areas. We do not believe that physical retail is dead but desired locations are narrowing and can be segregated into destination and convenience markets, with their own specific retailer requirements. In addition, the growth in spend on experiences, such as eating out, at the expense of clothing means that the leisure sector remains of interest, particularly assets in mixed-use locations that attract footfall from a variety of consumers.
At our upcoming investment seminar on 24th May we will be exploring a number of these themes and how they relate to our investment strategy in more detail. In what promises to be an interesting session we will be hearing about consumer trends from IPSOS MORI as well as hearing from the Head of e-commerce at Debenhams about their experience and their response to these challenges. For further information about our seminar please contact Victoria Conrath at email@example.com