REPORTS OF THE DEATH OF THE HIGH STREET ARE SOMEWHAT EXAGGERATED

Published 31 January 2018

Shopping webThe year has started with another major retailer reporting tough trading conditions, with House of Fraser confirming that it is seeking reduced rents on some stores.  Such news can be troubling for those who are investors in retail property – and yet to paraphrase Mark Twain, reports of the death of the High Street are somewhat exaggerated.

It is true that the UK has one of the most developed online shopping economies in the world.  According to the latest British Retail Consortium/KPMG analysis, from a standing start two decades ago, around one in four non-food purchases are now made online.

Whilst the same survey predicts further increases in this figure, it seems that growth is slowing, and may be close to plateauing.  The report says that online sales will only increase by three per cent in the 2020s, peaking at around 33 per cent.  So there is plenty of life in bricks and mortar retailing yet.

The early financial results from retailers confirm this: whilst there were some poor performers, those which have evolved their offer have fared better – for example, Next upgraded its 2018 profits forecast after a strong Christmas.

What this shows is that whilst ‘commodity’ products will continue to be bought online, those High Street retailers that can offer a genuine shopping experience will do well. 

Locally, there are a couple of good examples of this.  Faced with the threat of House of Fraser opening in the city some years ago, Jarrold department store invested in creating a really attractive shopping environment, as well as strengthening their product offer – and they continue to do so, as witnessed by the opening of their expanded food hall and wine bar in the second half of last year.  While House of Fraser struggled nationally, Jarrold was seemingly buzzing over the Christmas period.

Likewise, the Norwich Lanes businesses have got together to create a genuinely different shopping experience, bringing together a diversity of independent retailers offering something which simply can’t be found online.

The lesson for retail property investors is clear: as well as buying properties in the right location, ensuring that you have tenants who are committed to providing a compelling customer experience is key.

Online shopping has eaten away at retail market share significantly over the past years, but I sense we are starting to see a backlash as shoppers realise that clicking on an Amazon page does not offer the same retail satisfaction as physical visiting a store. 

Both online and bricks and mortar retailing are here to stay; investors will have to be increasingly savvy to ensure they are putting their money into the kind of retail which will retain consumer appeal in a connected world.

Guy Gowing | Managing Partner

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