Aviva Investors, Europe’s largest property investment manager, has warned that traditional retailers operating in the UK will soon be wiped out.
The company has already shrunk its UK portfolio, selling 110 properties worth £950m this year alone and acquiring only six new ones.
What do retailers need to do to survive?
Chris Urwin, head of global research for real estate at Aviva, said in the report entitled The Future of Retailing and the Implications for Retail Retail Estate published on Monday:
The UK retail sector will need significantly fewer stores in the period ahead . . . We expect to see clear winners and losers.
He added that shopping centres and smaller shops need to provide consumers with “instant gratification,” which means no long queues for starters. As online shopping becomes the norm, physical retailers must offer consumers a personalised, “high-engagement” experience to avoid closure.
To compete, shopping centres could try to expand beyond just selling a variety products by opening fitness centres, restaurants and cinemas.
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“Increased leisure offer will be important for many shopping locations in increasing their destination appeal as shoppers search for a more varied and rounded shopping experience,” Urwin said in the report.
Last year, Aviva transformed Manchester’s Corn Exchange into a leisure destination complete with a range restaurants and bars as well as a hotel on the upper floors.
Aviva currently manages £20bn worth of property in the UK.
“The retail pie is set to grow relatively slowly and physical stores will capture a smaller share of that pie overall,” Urwin added.
The Aviva report was published on the same day as a report from the British Retail Consortium (BRC), which warned that British shoppers will face higher prices unless EU nationals can work freely in the UK after Brexit.
BRC chief executive Helen Dickinson said:
From our data it is clear that unless we have the right structures in place to support retailers attract, recruit and retain workers, consumers will soon start to see and feel an impact as they shop.
A separate study published four months ago by Colliers, a global commercial real estate company found that the number of all shops in the UK that have been empty for more than two years has increased by 20 percent, to about one in 28.