2023-11-08-莱坊-Retail_Monitor_Q3_2023_2页_1mb

UK Retail Monitor - Q3 2023 Summary

Core Content

The Knight Frank Retail Monitor for Q3 2023 provides an overview of the UK retail sector, highlighting trends in consumer markets, occupier markets, and investment markets. The report suggests that while the sector is showing signs of improvement, a full recovery is not expected until 2024.

Main Points

Consumer Markets

• Retail Sales:
  • Q3 retail sales (values) grew by +0.3% compared to the previous quarter.
  • Year-on-year growth accelerated to +5.6%, indicating a positive trend.
  • Volumes were affected by inflation, with a -2.0% YoY decline, but less severe than previous quarters (Q1: -5.0%, Q2: -2.5%).
• Category Performance:
  • Select discretionary items and bulky goods saw notable growth in both value and volume:
    • Footwear: +20.9% (value) / +15.3% (volume)
    • Cosmetics: +11.2% (value) / +3.2% (volume)
    • Furniture: +7.2% (value) / +2.5% (volume)
• Consumer Confidence:
  • Consumer mood improved gradually during the quarter (July: -30 pts vs. Sept: -21 pts).
  • Confidence in personal financial situations improved more than confidence in the wider economy.
  • Overall sentiment remains negative but is trending upward.
• Supporting Factors:
  • Easing inflation rates (CPI: +6.6% in Sept 2023, lowest since Feb 2022).
  • Strong wage growth (+7.8% in Aug 2023, one of the highest annual rates since 2001).
  • Historically low unemployment (4.3%).

Occupier Markets

• Wilko's Demise:
  • The closure of Wilko marked the first major high street casualty of 2023.
  • However, it did not trigger wider retail distress, with only 970 stores impacted year-to-date compared to 2,318 in 2022.
• Reoccupation:
  • Several retailers, such as B&M and Poundland, acquired prime locations from Wilko.
  • Wilko announced its return to high streets by December 2023.
• Vacancy Rates:
  • Vacancy rates remained stable at 15.4%, slightly below the peak of 15.9%.
  • These rates are still higher than pre-pandemic levels (Jan 2020: 13.3%).

Investment Markets

• Sector Resilience:
  • Retail was one of the more resilient sectors in commercial real estate (CRE), with a total return of -8.0% for the 12 months to Q3.
  • This outperformed other sectors such as All Property (-11.9%), Offices (-16.7%), and Industrial (-14.9%).
• Income Returns:
  • Retail had the highest income return at +5.8%, compared to other sectors.
• Sub-Sector Performance:
  • Shopping Centres were the most stable, with a total return of -4.3%, outperforming Retail Warehousing (-7.3%) and wider Retail (-8.0%).
  • Shopping Centres also had the best income return performance at +6.9%.
• Transaction Volumes:
  • Q3 transaction volumes reached £1.7bn, a marked improvement from Q2's £0.9bn.
  • Retail volumes were -6% lower than Q3 2022.
  • Shopping Centres and Foodstores saw significant increases in transaction volumes: £278m and £850m, respectively, compared to £47m and £247m in Q2.

Key Information

• The retail sector is on an upward trajectory, but a full recovery is not expected until 2024.
• Consumer confidence is improving, driven by ** modern economic factors.
• Wilko's closure had a localized impact, with fewer stores affected than in previous years.
• Shopping Centres and Foodstores are showing signs of recovery in investment markets.
• Debt costs remain high, limiting transaction volumes to cash buyers.
• Vacancy rates are still elevated compared to pre-pandemic levels, but have stabilized.

Contact Information

For more insights or property advice, you can sign up for Knight Frank's quarterly dashboards and weekly Retail Note.

• Stephen Springham - Partner, Head of Retail Research
  Email: stephen.springham@knightfrank.com
  Phone: +44 20 7861 1236

• Emma Barnstable - Associate, Commercial Research
  Email: emma.barnstable@knightfrank.com
  Phone: +44 20 8106 1385

• Charlie Barke - Partner, Head of Retail Capital Markets
  Email: charlie.barke@knightfrank.com
  Phone: +44 20 7861 1233

• Jonathan Eastwood - Partner, Head of Retail Agency
  Email: jonathan.eastwood@knightfrank.com
  Phone: +44 20 86827769

Conclusion

The UK retail sector is experiencing a gradual recovery, with improving consumer confidence and stable occupier markets. While investment markets are still facing challenges, Shopping Centres and Foodstores are showing resilience. The report highlights the importance of macroeconomic conditions and debt markets in shaping the investment landscape, with a continued focus on cash buyers and prime locations.