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    What will the retail market look like in 10 years’ time?

    We asked a panel of retail property experts for their predictions for the sector.

    Localism and sustainability will be key

    The retail real estate market will be defined by assets offering experiential in-person capabilities versus e-commerce players providing convenient online shopping, although there is increasingly an overlap between.

    For brick-and-mortar retail to compete with e-commerce will depend on whether venues can offer enhanced in-person experiences or greater convenience than online, or ideally both. This will help reshape consumer preferences, which have swung in favor of digital, driving footfall and investor demand.

    As part of this, we believe localism and sustainability will become key features of future retail assets. Venues will increasingly reflect the local communities they operate in and provide an alternative to the environmentally costly model of last-mile delivery and returns.

    Simon Marx
    Managing director, European research and strategy
    LaSalle Investment Management

     

    Integrating offline and online storefronts

    It seems inevitable that the retail sector will be smaller in 10 years’ time, as redundant space is converted to residential and other uses. How much smaller will depend on at what point the market share of online retail reaches equilibrium. In round terms, we expect the retail sector to shrink by a third, but that will not all happen in the next 10 years.

    Secondly, we believe that the future success of retail schemes will largely depend on retailers who have (fully) integrated their online and in-store businesses. That means a focus on selected locations, where retailers can use more space for experience, where employees can explain products to customers, with more storage space for handling online orders and returns, but less space for check-outs and shelving.

    Finally, in common with other real estate, retail faces a major challenge from climate change. Half of shopping center floorspace in Northern Europe is more than 30 years old. That will require large-scale investment in heat exchanges, solar panels, etc, but also thinking more broadly about the resilience of local transport and other infrastructure.

    Harry Pickering
    Head of UK retail
    Schroders Capital

     

    ‘A trifecta of core competencies’

    Over the next decade, technology, data and AI will play an increasingly important role in how landlords and tenants better understand their customers. However, the success of retail won’t be achieved in a digital world alone. A landlord/tenant partnership that works in tandem to engage with customers in the physical real estate world will be critical.

    Historically, a strong value proposition and best-in-class real estate locations were the primary differentiators. Going forward, these are table stakes. Landlords and tenants that develop a trifecta of core competencies will survive disruption: a true understanding of the customer, an offering of best-in-class products and services and an unparalleled customer experience. Pricing power will be driven by these key attributes and landlord/tenant alignment across all three will be essential.

    Todd Rollins
    Head of retail, Northeast, Midwest, urban US
    Nuveen Real Estate