The Retail Occupational Market

The strong consumer economy is spurring a sharp increase in confidence amongst retailers, particularly around the prospects for Christmas 2015. Consequently we expect that this will be the best digital and physical Christmas since the last boom, with both LFL sales and margins expected to show an increase on last year.

Of course, this does not mean that everything is plain sailing, and sales figures were generally disappointing over the summer. Another challenge in the run up to Christmas will be Black Friday, with the consumer clearly keen to find bargains, but retailers unwilling to divert sales from the lucrative Christmas shopping period. We expect to see tighter stock control around Black Friday, with less widespread bargains on offer this year than last.

Furthermore, the impact of the rise in the living wage is only just beginning to be explored, and we expect this to hit the "fixed-price" retailers hardest as they have no leeway to raise prices.

The last few months has seen a continuation of the strong levels of retailer demand for well-configured space in prime locations that we commented on in our last report. This demand is primarily being driven by value retailers (both in the food and clothing segments), but we are also sensing rising confidence amongst the mid and mass-market brands.

This confidence is being demonstrated in rising rents in the core locations, as well as an increasing number of deals being signed with no breaks on a 10-year lease, a real turnaround from the situation a year ago.

Looking ahead to 2016 we expect to see more new entrants to the UK market, many of whom will have larger requirements in terms of numbers and sizes of stores. These new entrants will increasingly come from Europe and Asia-Pacific, rather than the US (which has been the key source of new entrants over the last few years).

Another area of growth will be the rise in the number of pure-play internet retailers who will move to an omni-channel strategy (online-to-offline or O2O). Our recent Retail Myths report went into this trend in more detail, and identified 22 retailers who had already made this transition.

Finally, we also expect to see a continuation of the trend for brands to operate their own stores and showrooms. These will undoubtedly be confined to London and a few major regional cities and malls, but the diversity of brands who are considering this (New Balance, Tesla, Dyson) indicates that this is by no means a flash in the pan.