A new report from Savills Investment Management suggests that retail investors in Europe should focus on core high streets and retail parks as new technology transforms the retail landscape.
According to the research, the mega-trend of digitalisation and the ‘internet of things’ is causing massive changes in the retail market and buyers’ behaviour. It notes that growing internet sales are impacting the profitability of physical stores and influencing shop closures, especially outside main retail areas. The impact on retailers becomes more pronounced once internet sales reach 5-6% of total retail sales, the research shows.
'The role of digitalisation in the retail evolution is perhaps most visible in the tenant mix at shopping destinations. Whereas less space is being devoted to traditional sales, there is a significant increase in leisure and food & beverage space, which coincides with the trend towards eating out,' commented Kiran Patel, chief investment officer at Savills IM.
Although the trend varies across European cities, in general smaller towns and cities with a low level of shopping experience are suffering, with e-commerce trends likely to put medium-sized shopping centres most at risk compared to larger destinations and smaller convenience centres.
Medium-sized regional centres and major cities with good economic fundamentals and socio-demographic parameters are better able to withstand e-commerce pressures, Savills IM says, while easily accessible retail parks are being used as strategic hubs for click & collect and online-order deliveries, or omni-channel retail.
'Reports of the death of the high street have certainly been exaggerated,' Patel added. 'Even some pure e-tailers are opening flagship stores on high streets. For example, an online furniture store recently opened a store in Soho in central London and a shoe retailer opened four shops in the Berlin, Frankfurt, Hamburg and Munich city centres,' he concluded.
