However, a decline in consumer confidence means retail sales are still at much lower levels compared to last year.
While footfall remains c.40% down year-on-year across most retail asset types, this is a significant improvement on figures seen throughout lockdown, when numbers fell c.80% year-on-year. Retail parks have out-performed other asset types due their open-air environment, spacious layout and car parking facilities.
Online retail penetration tailed off slightly to 31% in June, compared to 33% in May. However, this is still significantly higher than the 19% we saw back in February. Online grocery sales totalled 11% in June and was the only sector not to experience a drop-off in online sales following the opening of all stores. This may indicate that those people who have moved their grocery shopping online will do so for the foreseeable future.
Retail investment market activity is not expected to pick up until Q4 2020. UK retail investment volumes declined 37% year-on-year, reaching £1.58bn for H1 2020 compared to £2.5bn for H1 2019. Discounts available on retail assets should attract investors and may encourage some asset repurposing to non-retail.
Retail share prices have also rebounded since the UK lockdown was lifted, although are still below pre-Covid levels whilst yields have continued to expand across retail asset classes, and are expected to increase further, as the effect of Covid-19 continues to be felt. In the short-to-medium term, continued in-store investment to accommodate government guidance is expected, with the omnichannel business model remaining a key focus for retailers in the long-term.
New leases with more flexible structures such as turnover rents will become more common, particularly to help retailers navigate through the upcoming months of uncertainty.
Rhodri Davies, Executive Director and Head of Retail at CBRE said: “We have a long way to go before we see the retail sector performing at pre-Covid levels, but increasing footfall volumes and a pick-up in deal activity signal positive signs for the sector and show that the retail market is already starting to bounce back.”
Luisa Janisch, Associate Director, Retail Research at CBRE added: “This challenging period has highlighted the importance of flexibility in rental agreements. The lease moratorium has been extended to 30 September, however, it is clear that the long-term success of these schemes relies on the sharing of the burden between landlords, tenants and the banks.”