Retail market update Autumn 2024

Shoppers on retail high street

Value add.

In short: The momentum that was building in the sector in late 2023 has stalled in H1, thanks to rising business costs. But the wider landscape is improving – retail sales are edging up, and footfall is also improving across all sectors. In fact, footfall in retail parks actually rose in July, the first annual rise in at least two years. A lack of new retail development will put a floor under vacancy rates and rents, and luxury retail and retail parks still lead the way – with some large investment deals in central London in recent months. The Government has promised to reform business rates, but this will take time – years at least

The challenges in the retailing environment are easing slightly amid rising consumer confidence. But the cost of living is still relatively higher compared to pre-pandemic, and as such the volume of retail sales has yet to pick up materially

Graph showing retail sales index volume and value of sales.

Chart showing retail sales volume monthly change july 2024_r

Retail sales are starting to recover, while volumes have ticked up from a low at the end of 2023, the value of sales continues to climb even as inflation has fallen back, signalling a higher spend among consumers.

The impact of internet sales has fallen since the pandemic, but the level of internet sales is still well up compared to 2019. However, seeing online sales as a blunt threat to high streets may not be the full story. Some of the areas of the country which register the highest levels of internet sales are also those where the high street is thriving, according to a recent Centre for Cities report. The health of high street seems more closely correlated to other factors such as the level of disposable income and the local jobs market.

The improvement in the retail landscape is also highlighted by the footfall numbers below from the British Retail Consortium (BRC), which shows an improvement across the board, with the first annual rise in footfall in Retail Parks in at least two years.

But the scale of the challenge in the retail sector is highlighted by research from the centre of retail research which shows 62 retail businesses failed in 2023 – the highest number since the research began in 2007. However, this resulted in only 971 store closures, while the 54 retail business failures in 2020 affected 5,214 stores closing.

Chart showing UK footfall % change

The average vacancy rate is 3.1%, but this rises to 6.2% for shopping centres, according to CoStar. Around a quarter of all UK shopping centres, some 171 assets, have a vacancy rate of more than 10% – while only one in ten of high streets and 3% of retail parks have this level of vacancy

Retail parks have the lowest vacancy rate at 2.3%, below pre-Covid levels, and are the most resilient to store closures

Rents re-based during the pandemic, and there is now rental growth being registered for high street shops (up 1.1% in the year to June) and retail warehouses (+1.4%)

On the High Street: tenant demand is increasing as rents have been re-based and in some UK cities this is spurring rental growth. Investors are now seeing the high street as an opportunity given both the re-based rents and decrease in values over the last 10 years. Cathedral cities and “villages” in Greater London are seen as locations with good potential

Retail Parks: The occupational dynamics for retail parks are strong with an established pool of retailers expanding their portfolios. A small number of active domestic and overseas institutional investors have dominated, but there is no shortage of active investment requirements

Shopping Centres: This is a polarised sector, with dominant regional & right-sized convenience centres sought after while shopping centres that are no longer fit-for purpose at the at the other end of the scale. Yields for even the best stock now at 8.00% -10%, and deal volumes are likely to remain subdued for the foreseeable future

Foodstores: Growth remains in the convenience sector. Very limited activity for the larger out of town stores. Rental growth for large stores is flat in South East, but other parts of the UK are seeing rents fall. There is keen interest from a range of institutional and specialist investors – deal volumes in 2023 of £2.49bn boosted by Asda S&L (£650m) and Sainsbury’s (£430m)

The Levelling Up & Regeneration Act (LURA) comes into force later this year, and this will allow Councils to force vacant units into compulsory rental auctions if the property has been unoccupied for a year, or 366 days in last two years. More than 9% of the UK’s high street units have been vacant for more than a year, and landlords have eight weeks to find a tenant once a Council has served notice that it intends to force an auction. Moving ahead with this will require manpower and finances, which has been an issue for Councils in recent years.

Graph showing retail rental growth high st shop centre

Graph showing UK rental growth

Business rates, which affect retail business particularly strongly, rose by 6.7% from April. The multiplier increased for properties with a retail value of more than £51,000, from 51.2p to 54.6p (the multiplier will be static for properties worth less than £51,000). There is a 75% business rate relief available for qualifying retailers up to £110,000 per retailer, which will benefit small retailers. The Government has repeatedly said it will reform business rates, but as highlighted in our recent blog, the complexity of the rules mean this is unlikely to happen any time soon.

Graph showing retail completions UK

Investment volumes low again in H1. Some £6 billion was invested into the UK retail sector in H1, down from an annual average of £11 billion. This figure was supported by some large deals on Bond Street in London as shown in key investment deals below.

Yields are beginning to stabilise after moving out strongly in line with rising interest rates. The exception here is retail parks, where stronger demand and high occupancy rates, coupled with evidence of rental growth has pushed down yields.

The re-pricing in the shopping centre market, with owners now adjusting expectations accordingly have opened up this market for investment, with several large deals happening in Brighton and Livingston – all at large discounts to asking price.

In line with the industrial and office sectors, there is strong investor interest in schemes that have the potential for re-development, especially for residential and urban logistics.

Chart showing retail yields NIY vs 10yr bond to end Q2

Retail: Key investment transactions

AddressLocationDateBuilding size sq ftYield (%)Sale price (£)Buyer
130-134 New Bond Street W1LondonQ2 202431,1313.5%£226.5mBlackstone
178 New Bond Street W1LondonQ2 20243,3642.3%£82mRichemont International
West 12 Shopping Centre W12LondonQ1 2024300,0006.4%£58.5mWest 12 Investments
50 Pingle Dr Bicester Village Outlet CentreBicesterQ3 2024348,637 £1.5bnHammerson
Purley Cross Retail ParkLondonQ1 2024126,4105.5%£59mDTZ
Omni Centre LeithEdinburghQ1 2024221,3548.1%£64.1mTriple B Ltd
Source: Cluttons, CoStar

Key Statistics

Retail:
Data to end Q2 2024 unless otherwise stated
General retail
 Current quarter
(last quarter / 5yr ave)
Occupier 
Availability rate %3.2% (3.1%/3.9%)
Vacancy rate %3.1% (2.9%/2.7%)
Rental growth % annual-0.2%
(0.4%/-0.9%)
Quarterly take up sqft2.5m sqft
(3.6m/4.8m)
Supply 
Completions (gross delivered) sqft483,000m
(841,000m/1.6m)
Total under construction sqft 4.9m sqft
(5.3m/8.2m)
Investment 
Quarterly sales volume £ £1.4bn
(£1.4bn/£2.1bn)
Average initial yield %*  6.8%
(6.8%/6.4%)
Prime Retail Warehouse initial yield % (Q1 2024)5.75%
(6.00%)
Prime Solus (15 yr)6.0%
(6.0%-6.25%)
Prime Shops % (Q1 2024)6.75%
(7.0+%)
Prime Dominant Regional Shopping Centre8.25%+
(8.25%+)
Source: Cluttons, CoStar, MSCI All Retail * net initial yield

The information provided in this report is the sole property of Cluttons LLP and provides basic information and not legal advice. It must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Cluttons LLP. The information contained in this report has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. Cluttons LLP does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.

Contact

If you do not wish to receive further communications from us, please email [email protected]. More details on how to opt out can be seen in our Privacy Policy.

Jonathan Rhodes

Partner, national head of valuation

Head office

T +44 (0) 7971 809 798
Headshot of Jonathan Rhodes, national head of valuations, Cluttons
Contact

If you do not wish to receive further communications from us, please email [email protected]. More details on how to opt out can be seen in our Privacy Policy.

Ralph Pearson

Partner, commercial agency

Head office

T +44 (0) 7894 608 020
Ralph Pearson
Contact

If you do not wish to receive further communications from us, please email [email protected]. More details on how to opt out can be seen in our Privacy Policy.

Richard Moss

Partner, commercial valuations

Head office

T +44 (0) 20 7647 7226
Richard Moss
Contact

If you do not wish to receive further communications from us, please email [email protected]. More details on how to opt out can be seen in our Privacy Policy.

Ben Havery

Head of capital markets

Manchester

T +44 (0) 7581 053 929
Ben Havery, partner - capital markets, Cluttons

Latest commercial research

Commercial market update Autumn 2024
Research

Commercial market update Autumn 2024

The economy is so far providing a tailwind for the new government. Inflation has fallen, and economic growth has been more robust than expected. The early rate cut at the start of August was a close call, but it has provided a fillip to confidence across the board.
Office market update Autumn 2024
Research

Office market update Autumn 2024

The structural change in the office market is only becoming more entrenched. There’s a continued flight to quality and strong appetite for sustainable best-in-class office space while tenant demand for secondary or tertiary space is in the doldrums.
Industrial market update Autumn 2024
Research

Industrial market update Autumn 2024

Logistics and standard industrial continue to outperform compared to the rest of the commercial property market, although performance and investment levels have eased over the last 12-18 months.
Commercial market update Spring 2024
Research

Commercial market update Spring 2024

It’s now widely accepted that interest rates have peaked, the key question now is when will the central bank start to cut rates, and how low will they go in the coming year.  
Office market update Spring 2024
Research

Office market update Spring 2024

The structural change in the office market is ongoing, with strong appetite for best-in-class office space which meets high net-zero requirements and insipid demand for secondary or tertiary space. The investment market was quiet overall in 2023, although some notable deals were struck where pricing was competitive.
Retail market update Spring 2024
Research

Retail market update Spring 2024

Take-up rose towards the end of 2023, but overall vacancy rates are flattered by the lack of supply in the market. The bright spot for landlords is luxury retail and retail parks, where consumer demand is still relatively stronger.
Industrial market update Spring 2024
Research

Industrial market update Spring 2024

Vacancy rates creep up and rents ease. The recalibration of the Industrial market after the pandemic uplift continues, but overall, the sector continues to outperform compared to other asset classes.
Economic update Spring 2024
Research

Economic update Spring 2024

The economy grew more than expected in November, according to the latest data from the ONS, but there is still a risk that the UK could dip into recession.
Commercial market update Winter 2023
Research

Commercial market update Winter 2023

The Bank of England’s decision to keep the base rate on hold at 5.25% for the second consecutive time in November has raised the prospect that interest rates are at their peak.
Office market update Winter 2023
Research

Office market update Winter 2023

Flight to quality continues. There has never been such a distinct divergence between prime and secondary property, and this is still being driven by companies adjusting to changing working patterns as well as a desire to meet higher net-zero targets.
Industrial market update Winter 2023
Research

Industrial market update Winter 2023

Slowing rental growth. Robust occupational market conditions amid tight supply are helping to maintain a continued confidence after significant repricing in the sector.
Retail market update Winter 2023
Research

Retail market update Winter 2023

Slowing market. Prime high street assets are among the best performing within retail – these assets have stabilised and there is opportunity for future rental growth where values have been rebased.
Commercial market update Autumn 2023
Research

Commercial market update Autumn 2023

Will they? Won’t they? This is the key question around whether the UK’s base rate will exceed 5.75%. There have been enough mixed messages to muddy the waters – inflation data released in June showed that inflation was stuck at 8.7% in May, which prompted forecasts that the base rate would peak at 6.5% from the current rate of 5.25%.
Office market update Autumn 2023
Research

Office market update Autumn 2023

UK office vacancy rate continues to climb. Weak demand and strong supply are resulting in an ever-rising vacancy rate for offices across the UK, which has hit 7.7%, up from less than 5% before the pandemic.
Retail market update Autumn 2023
Research

Retail market update Autumn 2023

The retail environment remains challenging. The rising cost of living, and recent disappointing weather have led to a further tick down in overall sales.
Industrial market update Autumn 2023
Research

Industrial market update Autumn 2023

Vacancy rate remains low. Net absorption of industrial space dipped into negative territory in Q2 2023 for the first time in 11 years as take up fell back to levels last seen before the pandemic.
UK economic update Autumn 2023
Research

UK economic update Autumn 2023

The key economic move over the last few months was the Bank of England’s decision not to raise interest rates in September.
UK economic outlook Q3 2023
Research

UK economic outlook Q3 2023

The economy settled down relatively quickly from the shock of the mini-budget in September last year and the resulting spike in gilt rates and mortgage rates.
Commercial market update Q2 2023
Research

Commercial market update Q2 2023

The UK’s economic mood music has been more upbeat so far this year than many would have anticipated in the wake of the mini-budget last year. This culminated in the IMF, traditionally circumspect about the UK’s economic outlook, confirming in late May that the country would not enter recession this year, contrary to its earlier forecasts.
Office market update Q2 2023
Research

Office market update Q2 2023

Office take-up gained some momentum towards the end of Q1 as employees continue to return to the workplace in greater numbers. But overall demand for office space remains muted compared to historical norms.
Retail market update Q2 2023
Research

Retail market update Q2 2023

Retail sales fell back in May after rising slightly in April, according to a survey from the CBI, but the overall outlook is slightly more upbeat than at the beginning of the year as consumer confidence continues to climb and the prospect of lower energy bills is factored in.
Industrial market update Q2 2023
Research

Industrial market update Q2 2023

Average industrial property yields, according to MSCI, which softened sharply last year remained largely unchanged in Q1 2023, as the market absorbed the new economic landscape in the UK.
UK economic outlook Q2 2023
Research

UK economic outlook Q2 2023

Higher than expected inflation dampens expectations for UK economy. Inflation data was higher than expected in May, which has weighed on business confidence, and has pushed interest rate expectations, and the cost of borrowing, higher.
Commercial market update Q1 2023
Research

Commercial market update Q1 2023

The bond vs property yield spread ticked up in Q4 but remains nearly the narrowest in a decade.
Retail market update Q1 2023
Research

Retail market update Q1 2023

Retail sales ticked up slightly in January but are still down on a three-monthly basis from the post-pandemic highs in the summer of 2021.
Industrial market update Q1 2023
Research

Industrial market update Q1 2023

The strong performance in this sector over the last few years mean that the upheaval caused by rising interest rates and the September’s mini-budget, which caused a surge in gilt yields, was more pronounced than other sectors.
Office market update Q1 2023
Research

Office market update Q1 2023

UK office vacancy rate rises, but masks a two-tier market.
UK economic outlook Q1 2023
Research

UK economic outlook Q1 2023

The economic outlook for the UK is challenging this year, but there is growing consensus that the downturn will not be as long as previously expected.
Commercial market update Q3 2022
Research

Commercial market update Q3 2022

Bond yields have settled down, but property yields are exposed to some repricing as investors take into account higher borrowing costs.
Industrial market update Q3 2022
Research

Industrial market update Q3 2022

Rents and capital values surged this year in response to high levels of demand for occupiers and investors alike.
Office market update Q3 2022
Research

Office market update Q3 2022

The central theme in this sector is the flight to quality by investors and occupiers alike.
Retail market update Q3 2022
Research

Retail market update Q3 2022

This sector was hit hardest by Covid and the cost-of-living led recession will likely deliver another blow.
Commercial market update Q2 2022
Research

Commercial market update Q2 2022

Economy is slowing and, early suggestions that we may avoid recession have been swept aside by the Bank of England following on from their August meeting.
Industrial market update Q1 2022
Research

Industrial market update Q1 2022

The rent rise continues: If the classical economists’ definition of inflation being ‘too much money chasing too few goods’ needed a perfect illustration that the industrial sector is it.
Office market update Q1 2022
Research

Office market update Q1 2022

Historically there has been a very strong link between employment growth and increased demand for office space. The employment market is one part of the economy that is weathering the current storm well.
Retail market update Q1 2022
Research

Retail market update Q1 2022

with so many bad news headlines over the cost-of-living crisis and geopolitical uncertainty, it is no surprise that consumer confidence has faltered and dramatically so.
Commercial market update Q1 2022
Research

Commercial market update Q1 2022

The commercial real estate sector has been through an extraordinary year, outperforming other asset classes with total returns of 23.9% over the past 12 months.
Commercial market update Q4 2021
Research

Commercial market update Q4 2021

It has been a long pandemic, and Omicron provided a sharp reminder that it might not be over quite yet. Despite this, there are signs of recovery in all sectors.
Industrial market update Q4 2021
Research

Industrial market update Q4 2021

Rental growth continues to rise, hitting 7.2% a year in Q4 2021. Industrial space under construction is at the highest level ever recorded.
Office market update Q4 2021
Research

Office market update Q4 2021

Large year-end London office deals show confidence in the outlook, but TfL passenger volumes took another hit from Omicron in December.
Retail market update Q4 2021
Research

Retail market update Q4 2021

Slide in retail rents halts, but inflation and interest rates pose a threat as cost-of-living bites.
Retail market report Q3 2021
Research

Retail market report Q3 2021

Retail capital values over the last three months have grown by 3.2% (the strongest quarterly rate since 2010) with values stabilising across all retail segments.
Office market report Q3 2021
Research

Office market report Q3 2021

There are emerging signs of polarisation in the office market between top spec buildings versus those of a lower quality.
Industrial market report Q3 2021
Research

Industrial market report Q3 2021

Industrial investment flows are now not only ahead of the same period in 2020 but also significantly ahead of 2019 levels, driven by the continued strength of investor interest in the logistics sector.
Retail market report Q2 2021
Research

Retail market report Q2 2021

Retail yields have repriced as average UK retail yields are now 6.8% which compares with 5.3% five years ago.
Office market report Q2 2021
Research

Office market report Q2 2021

Financial service companies are seeking out the best model for hybrid working, with 79% of financial service firms surveyed by CBI/PWC in Q2 2021 reassessing their workspace needs and 82% are planning on implanting hybrid ways of working.
Industrial market report Q2 2021
Research

Industrial market report Q2 2021

Investment volumes in the industrial sector over last 12 months increase by 75% as investment levels in the sector have soared.
UK retail market review Q4 2020
Research

UK retail market review Q4 2020

Internet sales are 56% higher than they were in February 2020. Non-food store sales are 27% lower than at the start of the pandemic however, despite this, traditional retailers are continuing to grow their online presence and shrink their bricks and mortar portfolios.
UK office market review Q4 2020
Research

UK office market review Q4 2020

UK office market more resilient than expected with declines in values less severe than commentators had predicted.
UK industrial market review Q4 2020
Research

UK industrial market review Q4 2020

Demand for industrial and warehouse space is driven by the economic performance of the retail, logistics and manufacturing sectors.
UK retail market review Q3 2020
Research

UK retail market review Q3 2020

2020 has been a difficult year for bricks and mortar retail. It is a commonly repeated aphorism but nonetheless true that the pandemic together with Lockdown 1.0 and 2.0 have crammed five or more years of anticipated changes in markets into the last nine months.
UK industrial market review Q3 2020
Research

UK industrial market review Q3 2020

The drivers of demand for industrial real estate will continue to evolve.
UK office market review Q3 2020
Research

UK office market review Q3 2020

Structural changes effecting the UK office market will play out over several years.
UK office leasing review Q2 2020
Research

UK office leasing review Q2 2020

Coronavirus leads to dramatic declines in leasing activity.
UK office investment review Q2 2020
Research

UK office investment review Q2 2020

Transaction volumes decline during lockdown.
UK retail leasing review Q2 2020
Research

UK retail leasing review Q2 2020

Landlords and tenants shared the strain of pandemic lockdown. COVID-19 is accelerating the trend in the shake-out of retail.
UK industrial & distribution review Q2 2020
Research

UK industrial & distribution review Q2 2020

Transaction volumes declined during lockdown, with investment into distribution most favoured.
UK retail investment review Q2 2020
Research

UK retail investment review Q2 2020

Retail investment market shuts down during the COVID-19 lockdown.
London office market outlook summer 2018
Research

London office market outlook summer 2018

Cluttons has released its London Office Market Outlook report for Summer 2018.

Related services

Commercial agency

Agile and highly responsive in our approach we are ideally placed to advise you on buying, selling, leasing, or re-gearing your London and UK offices as well as other types of commercial and…

Commercial valuation

Our team of RICS registered valuers brings a wealth of experience advising property owners and lenders across the UK. We are experts in the broad range of commercial properties, undertaking…