Q4-2022_UK_Retail_Marketbeat

MARKE T B EAT

Retail Q4 2022 UNITED KINGDOM

Retailers scramble to navigate cost of living crisis Despite some positivityaround the Christmas trading period and an incremental increase in consumer confidence during Decembe r, retailers are rapidlytransitioning their efforts to overcome the cost-of-living crisis and ensure healthycash flow remains. Away from the Luxury category, several retailers are under-taking both store and range rationalisation strategies re-focussing efforts on their top performing locations and products in order to avoid administration or business failure. Such has been the effect of harsh trading conditions throughou t H2, as of November sales volumes remained slightlybelow their pre-pandemic 2019 levels, and significantlybelow their 2021 volumes, whils t 2022 total sales values outperformed both years owed to the impact of inflation. Although these economic headwinds serve as a stark warn ing, such trading conditions has significantlyeroded brand loyalty, and has resulted in fierce competition for market share across a r ange of categories, most notablyin the Grocery sector, where retailers are rapidly offering a range of discounting, and promotions to capture new consumers. Operational Efficiency, Omni-channel, & Opportunity A combination of the cost-of-living crisis, industrial action & disruption, and continuous adjustments to the workplace/home balance has resulted in considerable volatilityin the relationship between online and in -store retail. During December 2022, 26.6% of sales were facilitated online, considerablybelow the 30.5% observed during December 2021 and falling from the November level of 29.7%. As a result of such volatility retailers must now look to integrate a complete omni -channel experience throughout their operations. This is having a considerable impact on both location and fit-out considerations for those occupiers acquiring new space whilst trying to ensure operational e fficiencyis not compromised. Furthermore, an increase in the number of administrations and bankruptcies particularlywithin the retail world is providing opportunities to acquire space within prominent well fronted locations, often at a discount through assignment or sublease. Investment ActivityRemains Subdued According to RCA some £6.9bn of retail assets have transacted during 2022, 36.7% below the volume transacted last year. The n umber of properties transacted fell by 21% on the previous year, highlighting a fall in the average transaction value. Of the total vo lume a considerable contraction was recorded within the single asset category, approximately43% down on last year, whilst the number of portfoli os being acquired fell by just 8%. Capital continued to target London and the South-East accounting for approximately£2bn of total volumes, 28 transactions were also recorded in Manchester and the North-West accounting for over £750 million.Well considered capital remains prominentwithin the sector, particularly targeting value-add and opportunistic assets and those supported bystrong anchor tenants such as supermarkets. Sentiment is beginning to change, owed to the earlier re-calibration the sector under-took during the pandemic. It is anticipated that as stability returns to the economythe sector is well placed to attract investor interest.

YoY Chg

Outlook

+3% YoY High Street Rental growth

+4% YoY Retail Warehouse Rental growth

-1% YoY Shopping Centre Rental growth

Source: Cushman & Wakefield

LATEST INDICATORS

YoY Chg

Outlook

-42 Consumer Confidence (Dec 2022) -14.2% Footfall (Dec 2022 vs 2019) -6.1% Retail Sales Vol. Growth (Y-o-Y, SA, Dec 2022) 26.6% Online Share of retail. (By value SA, Dec 2022)

UK HIGH STREET RENTAL INDEX (Mar 2016 = 100)

UK HIGH STREET YIELD (%)

120

10

Prime Regional

Bond Street

110

8

100

?

90

6

80

4

70

Source: ONS, GfK, Springboard

Mar-16 Dec-16 Sep-17 Jun-18 Mar-19 Dec-19 Sep-20 Jun-21 Mar-22 Dec-22 2

60

Mar-16 Dec-16 Sep-17 Jun-18 Mar-19 Dec-19 Sep-20 Jun-21 Mar-22 Dec-22

Unweighted average for London (Oxford Street), Birmingham, Bristol, Cardiff, Leeds, Manchester, Newcastle

MARKE T B EAT

Retail Q4 2022 UNITED KINGDOM

Notable Expansions

Consumer Goods

Food & Beverage / Experience

PRIME HIGH STREET STATISTICS

SUBMARKET

£ PSF ZONE A YR

PRIME YIELD (%)

Edward Bavister Associate Director +44 (0) 203 296 2682 edward.bavister@cushwake.com

London (City )

240

4.50

London (West End – Bond Street)

2,000

3.00

London (West End – Oxf ord Street)

650

4.00

Manchester High Street

220

6.50

Dominic Bouvet Head of UK Retail & Leisure +44 (0) 207 152 5720 dominic.bouvet@cushwake.com

Birmingham High Street

180

6.50

Leeds High Street

125

6.75

Bristol High Street

85

7.00

Cardif f High Street

130

7.00

cushmanwakefield.com

SELECT 2022 RETAIL INVESTMENT TRANSACTIONS

A CUSHMAN& WAKEFIELD RESEARCH PUBLICATION Cushman & Wakef ield (NYSE: CWK) is a leading global real estate services f irmthat delivers exceptional value for real estate occupiers and owners. Cushman &Wakef ield is among the largest real estate services f irms with approximately 51,000 employees in 400 of f ices and 70 countries. In 2018, the f irmhad revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.

PROPERTY

LOCATION

BUYER

SQFT

PRICE / YIELD

Farnborough Retail Park

Farnborough

British Land

90,614

£34.8M / 7.65%

Project COS

Cheshire/Swindon

LaSalle IM

650,0000

£600M / 6.00%

Victoria Centre

Leeds

Redical/Riv ington Hark

208,000

£120M / 8.85%

Bull Ring (stake)

Birmingham

CPPIB

1,300,000

£155M / 7.35%

Bournemouth Castle Point

Bournemouth

Threadneedle / Delancey

684,000

£156M / 6.5%

©2021 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Source: RCA, Cushman & Wakefield