Cushman & Wakefield RETHINKING: The Shape Of Real Estate 2040

The pandemic saw a marked shift in consumer behaviour, with consumers opting to favour open air schemes with large spacious stores and the ability to travel independently and park their cars a determining factor. Whilst some reversion in consumer behaviour has been observed, the effects of these shifts are likely to be long-standing. As such demand has largely persisted through 2023 and is expected to continue, with retail parks outperforming other areas of the retail market in terms of occupier demand and footfall activity. The case for occupier demand is also compelling, owed to the size of available units within the asset class, their flexible configurations, and relative affordability. Although perhaps one of the more homogeneous retail real estate solutions, retail warehousing space offers strong clear heights, and often rear loading access, meaning they are well suited to facilitate omni-channel retail, or for the integration of a mezzanine sales floors creating a larger sales area. There are a number of examples of retailers using the additional space offered in the larger units to accommodate online fulfilment, both through click and collect and through stock picking for deliveries, as well as creating additional compartmentalised spaces that offer personalisation and experience in store. Thus flexibility of this space and its interaction with omni-channel retail is expected to safeguard the sector from the effects of digital retail.

Additionally, the sector and its occupiers have already proven resilient in the face of digital marketplaces. Typical occupier blends for the asset class, often involving a high exposure to household consumables and discounters, also serves the sector well. The majority of these retailers continue to show strong trading performances, with limited impact from the wider growth in e-commerce activity. This is largely due to physical bricks and mortar stores offering a relatively lower cost of business than pure-play digital retailers, which allows the pricing of products between the two channels to remain comparable.

These factors are attributable for the sustained momentum anticipated for retail warehouse parks.

However, the gradual uplift in demand-driven supply of 8.3% by 2040 is expected to be delivered incrementally and primarily through expansions of existing sites rather than in the form of significant new schemes being built. On net, we expect this could increase to total approximately 12.3 million sq ft of additional space in the sector in 2040 versus 2024.

RETHINKING: THE SHAPE OF REAL ESTATE IN THE UK

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CUSHMAN & WAKEFIELD