As 2024 begins, Completely Retail News spoke to Neil Hockin, joint managing director and head of leasing at Lunson Mitchenall about his thoughts on the last 12 months and his predictions for the coming year.
Q. What was the retail property story of 2023 for you?
A. “The retail and leisure occupational market strengthened significantly. Occupancy rates are up and consumer confidence appears to be strong.”
Q. What would you say the general mood in the market is at the end of 2023?
A. “Political uncertainty, rampant inflation and high interest rates have been in the headlines. However, retail and leisure rents have been rebased and the changes to the rating system have helped both landlords and tenants control total occupancy costs.”
Q. What strategies do you think will create success in 2024?
A. “The market is very polarised towards regional venues, the likes of St James Quarter, Edinburgh and Battersea Power Station have set a new benchmark for mixed-use development. We’ll likely see this divergence continue over the coming year with dominant schemes that strike the right balance of retail and leisure continuing to perform well.”
Q. Which sectors do you think will come out on top in 2024 and who do you think might struggle?
A. “The global economic issues weigh heavy, securing and servicing debt is difficult with borrowing costs at a 16 year high. Lenders are reticent to increase exposure to the retail sector whether this be direct or via property loans. Latest indications are that interest rates might reduce which will help both consumers and investors. Locations struggling to attract new tenants and with high vacancy rates will need to look at increasing innovative solutions to fill space and engage consumers or risk losing further ground to regional competition.”
Q. What would you like to look back on in a year’s time?
A. “In 12 months, we will be in the middle of a hard-fought election campaign, and I hope this will not stall the progress that’s been made in the last 2 quarters of 2023. We are selectively seeing rental growth in certain locations and a continuation of this and fewer empty shop units across all retail and leisure venues would represent a successful year. We are beginning to detect an improvement in investor sentiment towards the retail and leisure sector. Pricing is being rebased to level where purchasers can generate the types of return that make the sector look more attractive and with lower interest rates and greater access to debt we hope to see more large-scale investment transaction.”
Q. What’s your long-term outlook? What do you think the market will look like in five or so years?
A. “The horizon for both investors and occupiers is shorter than ever and looking five years ahead is a dangerous game. It is obvious that town and city centres and other retail and leisure destinations need to continue to evolve if they are to prosper. They need to provide consumers with a safe, vibrant and compelling offer and provide somewhere to shop, play, relax work and live. There is no one-size-fits-all solution and local authorities, developers and owners will need to provide agile and bespoke solutions.
“There are some great examples of retail led regeneration ranging from the very high-end city centre hubs through to regional community led schemes. These are all a different scale and use interesting and unique solutions to engage with their consumers via a compelling offer. Finding a way to come up with dynamic and deliverable solutions to make retail led destinations more relevant is the big challenge for the next five years.”
Q. What about the leisure market? Do you think that will continue to grow?
A. “Leisure is a key part of any retail destination, and this sector will continue to grow. Consumers are prepared to travel to visit best in class but are also happy staying local if the proposition is strong enough. With the cinema sector facing unparalleled competition from streaming giants, the sector needs to be more inventive. Competitive socialising works well and we see this growing in the virtual reality world where operators are able to change the preposition without the need for a complete refit. As with any rapid growth sector there will be casualties and we need to accept that not every concept is going to work, however this does present an opportunity to refresh brands and keep consumers engaged.”