The currently volatile environment for UK retailers presents a significant challenge to the commercial property sector. Along with the estimated 85,000 jobs lost in UK retailing in 2018 is the worrying rise in empty commercial units.
Figures published in the Scottish Retail Consortium-Springboard Footfall and Vacancies Monitor show hat one in eight high street shop premises lay vacant last month, with a 12 per cent town centre vacancy rate in Scotland, up the 11.1 per cent recorded last October.
Steps are being taken across the nation to repurpose some of these vacant premises for residential, hotel, leisure or community use.
However, UK retailers must also continue to repurpose their businesses to ensure they are relevant to the changing nature of consumer demands.
Many of those which managed to avoid insolvency last year are now embarking on store closure plans and rationalising their portfolios. The trend of traditional retailers extending their online offering also continues, with some smaller stores diversifying by installing convenient customer options such as Amazon lockers and becoming click-and-collect points for larger retailers.
Technological advances, including the use of mobile payment, scan and payment checkout apps, are also making the sector more efficient, while further progress in areas such as VR and AI offers an additional strand of support.
In spite of these positive developments, there is no doubt that many of the larger retailers will continue to struggle with the size and cost of their property portfolios. Debenhams is continuing discussions with its lenders and is not ruling out a company voluntary arrangement, while the new management at Marks and Spencer is promising dramatic changes in range, style and customer focus.
Meanwhile, other big high street names seek to negotiate reduced rents with their landlords to keep themselves trading. The changing nature of the marketplace requires retailers to make bold decisions to entice consumers and leverage value from their physical premises.
Apple and Selfridges are both successfully doing this by making shopping at their outlets an experience. Selfridges credits its successful Christmas trading period to the staging of festive events which drove people into its stores, and Apple delivers added value for customers in its premises by holding free events.
The progression of some online retailers moving to a bricks and mortar model could also make a positive impact on the commercial property sector. Amazon Go is reportedly looking at expanding its app-based convenience store brand into London with the potential of Amazon Books stores opening in the UK.
Physical premises supported by a strong online presence point to the future direction of travel in retailing. While we expect more casualties in the year ahead, the changes that are currently being implemented provides some comfort to commercial property landlords as retailing continues its challenging evolution.
The UK retail market is one of the most dynamic in the world and is the biggest employer in Britain; it is also one of the most adaptive to change. But landlords and tenants must act quickly to stem the tide of store closures and declining footfalls.