Commercial Quarterly Examiner – retail market update Q1 2025

The latest available BRC-Sensormatic Footfall Monitor data, covering March 2025, indicates a year-on-year decline in shopper numbers across the UK.

UK shopping centres, retail parks, and high streets saw a 5.4% decline in footfall compared to the previous year. Year-on-year High Street footfall decreased 4.0% and shopping centres experienced a 5.8% drop. Retail Park footfall fell 1.2%. This downturn is largely attributed to the timing of Easter, which fell in April this year, shifting seasonal
shopping patterns and impacting March footfall figures.

According to the BRC In-Store Non-Food sales decreased by 0.1% year on year in March, against an increase of 0.1% in March 2024. Online Non-Food sales increased by 1.8% year on year in March, against a decline of 1.4% in
March 2024. The online penetration rate being the proportion of Non-Food items bought online increased to 37.1% in March from 36.6% in March 2024. This was above the 12-month average of 36.8%.

As is customary, total UK sales increase of 1.1% y-o-y was attributed to the weather as a warm spell resulted in gardening and DIY equipment flying off the shelves. The small sales increase was achieved despite the comparisons with last year including an earlier Easter.

In March, Next plc released its preliminary full-year results for the fiscal year ended January UK online sales increased 5% but retail sales fell by-1%. Overall sales growth was 3%. The introduction of new tariffs in the USA, along
with the removal of de-minimis customs thresholds13 in the US and EU (the latter of which is planned for 2028), are currently anticipated to have relatively little impact on the overall Group’s sales or profits.

Marks & Spencer was enjoying a strong start to 2025 thanks to a fashion revival and the warm spring weather. That has now been seriously undermined as the retailer scrambles to deal with disruption caused by a massive cyberattack. The company paused contactless payments and the collection of online orders for 48 hours and has M&S halted all orders on its website which contributes a third of clothing and homewares sales amounting to almost
£3.8m a day.

Occupational view
The amount of retail space available to let rose by 0.9% in in Q1 2025. Shopping Centre availability increased 5.2% but Retail Park availability decreased by -3.2%. Net absorption of retail space over the 12-months to March
was across traditional retail outlets, Retail Parks and Shopping Centres was again negative indicating that more space is being released onto the market than is being let.

In 2024 the year-on year take up of retail space was 13.5% lower than in 2023. However, there are indications that the demand for space in Retail Parks and Shopping Centres is increasing. Take-up of Shopping Centre space rose by 10.3% in 2024 and in the 12-months ending March Retail Park take-up was 16.6% higher. This not a feature of the
occupier market for traditional shops.

All Shopping Centre market rental values have grown by 1.6% in the year to March and 12-month Retail Park rental growth is stronger still at 2.5%, up from 2.1% in December 2024. However, rental value growth for standard
high street shops is barely positive although this varies from centre to centre. Asking rents for High Street Shops have been falling in Northampton, Lincoln and Deby but increasing in Liverpool, Manchester and Edinburgh.

Investment view
High income returns and a slight re-rating in yields continue to produce some strong performance numbers from Shopping Centres and Retail Warehouses. Shopping Centre total returns over the year to March increased to
13.0% from 10.5% in the year to December 2024 and y-on-y Retail Park total returns were similarly 13.0% in March having been 12.5% in December 2024. Retail Park and Shopping Centre investment volumes were respectively 45% and 36% higher in 2024 than in 2023.

Festival Place, Basingstoke, a 1,127,629 sf Shopping Centre with over 200 retail and leisure units anchored by Marks & Spencer, Next, and H&M, fell into receivership in May 2023. A long leasehold interest at a fixed rent was sold by the Receivers, BDO, in April 2025 to MDSR Investments for £99,100,000 reflecting £88 psf CV. The freehold continues to be held by Basingstoke and Deane Borough Council.

Retail Parks are once again being acquired to support a strategy of investing in well-let assets delivering stable, secure income and long-term capital growth potential. In February this year, Royal London Asset Management
Property acquired the freehold interest in Eastern Avenue Retail Park in Romford from abrdn for £26,850,000 reflecting a 5.50% NIY and £374 psf. The Park contains 71,869 sf in units let to Wren Kitchens, Home Bargains, Burger King, Costa Coffee and others.