Retail investment market activity in the UK will not pick up until Q4 this year, says advisor CBRE.
Its latest retail market report reveals consumer footfall in the UK remains around 40% down year-on-year across most retail sector. At the height of lockdown it plunged around 80%, as the UK experienced the heaviest outbreak of the Covid-19 pandemic in Europe.
Online groceries was the only sector not to experience a fall in online sales following the opening of all stores. Ecommerce penetration tailed off slightly to 31% in June, compared to 33% in May. However, this is still higher than 19% in February.
UK retail investment volumes declined 37% year-on-year, reaching £1.58bn for H1 2020 compared to £2.5bn for H1 2019.
Discounts available on retail assets should attract investors and may encourage some asset repurposing to non-retail. Retail share prices have also rebounded since the UK lockdown was lifted, although are still below pre-Covid levels. Yields have continued to expand across retail asset classes, and are expected to increase further, as the effect of Covid-19 continues to be felt.
New leases with more flexible structures such as turnover rents will become more common, CBRE predicts.
Rhodri Davies, executive director and head of retail at CBRE said: ‘We have a long way to go before we see the retail sector performing at pre-Covid levels, but increasing footfall volumes and a pick-up in deal activity signal positive signs for the sector and show that the retail market is already starting to bounce back.’
Luisa Janisch, associate director, retail research at CBRE added: ‘This challenging period has highlighted the importance of flexibility in rental agreements. The lease moratorium has been extended to 30 September, however, it is clear that the long-term success of these schemes relies on the sharing of the burden between landlords, tenants and the banks.’
