Landlord News

Will retail growth help commercial property market?

Em Morley - May 28, 2015

Forecasts have suggested that retailers could well be in for their greatest performance in 27 years, which in turn could be good news for the commercial property industry.

A survey from the Confederation of British Industry (CBI) suggests that the mix of low inflation and a surging labour market has increased the average household’s spending power. In their survey of 63 retailers, the CBI found that this had increased growth in both retail and sales orders. According to the report, retail is experiencing its best performance since 2007.

Commercial gains?

Director of economics at the CBI, Rain Newton-Smith, said that this would be of benefit to national chains on the lookout to stable their financial ships following the recession. She said, ‘retailers will be encouraged to see growth in sales and orders on the high street bounding ahead.’[1]

‘Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.’[1]

‘Overall the outlook is bright for firms on the high street, but challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector.’[1]

Will retail growth help commercial property market?

Will retail growth help commercial property market?

 

Investment

The last point made by Newton-Smith could be of particular interest to the commercial property market. Supermarkets for example have struggled with the new influx of discounted brands being imported from abroad, and some have been forced to abandon plans to open new stores.

Data from the CBI’s report shows that brands with intentions to invest in business growth within the retail sector are still in negative figures. Obviously, this could be taken as very bad news, but a lot depends on the plans of outside investors and developers. Land previously set aside for supermarkets will eventually find its way back on to the market, meaning that it could be used instead for leisure or retail purposes. If this proves to be the case, strong regional growth will be expected, with any surge in retail sales benefiting investors with similar property elsewhere.

As a result, demand for strong retail destinations from domestic and overseas investors alike could rise further. This is turn will lead to an increase in activity in the retail property sector, in addition to allowing established investment firms the change to make further gains on their existing assets.

[1] http://www.movehut.co.uk/news/strong-retail-performance-set-to-boost-market-activity-29984/