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Summary
- The occupier and investor demand in the near term for both office and retail spaces continue to decline with expectations for rents and capital appreciation remaining in the red zone.
- The shift of consumers from traditional retail and offices towards online shopping has led to a surge in demand for industrial space and warehouses.
The coronavirus pandemic has indeed reshaped the economy and has also influenced people lives. The consequent lockdowns seem to have weighed down heavily on high-street retail shops. Even when the initial lockdowns were lifted, the high-street retail shops struggled to find shoppers as most of the people resorted to online shopping. The decline in revenue streams and outflow of cash against fixed costs such as rent has pushed the businesses to axe several jobs across the sector.
In recent decades, Britain witnessed a drastic change in the high streets as most of the shops and offices turned vacant. The shift of consumers from traditional retail and offices towards online shopping has led to a surge in demand for industrial space, and warehouses, according to the Royal Institution of Chartered Surveyors (RICS).
In the near term, the occupier and investor demand for both office and retail spaces continue to decline with expectations for rents and capital appreciation remaining in the red zone.
Also read: The Plight of High Street Retailers Amid the Covid-19 Crisis
The rental yields of the office and retail spaces may not appreciate until next year. Instead, the occupiers are renegotiating leases with the investors and shortening tenures. Since June, most people working in the services sector are being encouraged to work remotely. According to RICS, the demand for office spaces has weakened in London.
The accelerating shift of consumers towards online shopping has led to closures of non-essential retail. As a result, several high-street retailers are facing an existential crisis and closing shops. Recently, the 200-year-old department store chain Debenhams collapsed. The closure of Debenhams has put nearly 12,000 jobs at risk.
UK’s leading fashion retailer Boohoo Group Plc (LON: BOO) has bought Debenhams for £55 million. Notably, Boohoo has done well in online sales. In a similar arrangement, UK’s fashion retailer Asos Plc (LON:ASC) is relentlessly trying to acquire Arcadia’s brand Topshop.
The reason behind the collapse of these high-street brands is that these brands failed to keep up with the digital age and did not develop their online business model. But the unprecedented crisis caused by the pandemic has devastated the British high streets, which were an important cog in the wheel in the economy. The prominence of the online entities in the space will further reduce the workspace demand.
The UK has proactively procured coronavirus vaccines from Pfizer, AstraZeneca, and Moderna to turbocharge vaccination programmes to the masses. However, several new cases are surfacing every day. The plight of high-street retailers does not seem to end anytime soon.
