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Online shopping is having a “profound effect” on the commercial property market with the value in retail property set to fall by 15.9% this year, according to new research.
Job losses and store closures are forecasted to rise by 26,918 and 3,764 respectively compared with 2018 across the retail and hospitality sectors, according to real estate experts Altus Group’s annual Commercial Real Estate (CRE) Innovation Report, which surveyed over 400 major property owners and investors from around the world, each with more than £200m of assets under management.
62% of major UK property owners and investors said e-commerce businesses, such as Amazon, are disrupting the commercial real estate industry. According to Altus, real estate executives say this disruption is such it is having a “profound effect” on their decision-making.
The report comes as the Royal Institution for Chartered Surveyors takes the unusual step of instructing valuers to be “aware of the potential for significant changes in value” in retail properties.
Altus Group Managing Director Guillaume Fiastre said the industry’s valuation of retail properties had dropped significantly because of challenges facing the retail sector. “Retail of the future will use bricks-and-mortar spaces in a very different way mixed in with leisure and lifestyle residential spaces, for example. The most successful retailers – the survivors – are learning to draw in their customers with the promise of a personalised experience. Technology makes that all possible, but it still needs a strong human element,” said Fiastre. “The growth of online retailing, which had been seen as a difficult trend for property, is one property owners and investors can now take advantage of to drive revenue.”
The research comes after a report by investment manager Fidelity International last month suggested UK retail real estate with capital values are predicted to fall by 20 to 70% as a result of rent cuts, but the Booksellers Association warned there has been little sign of a fall in rents so far.
In response to the Fidelity report, the BA told The Bookseller in December: “Any rent reductions on the high street would be hugely welcomed by our members but in most places the trend so far is, sadly, the other way. Along with business rates (which the BA is actively campaigning to reduce) and other burdens such as parking and tax that unfairly burden high street retailers it is very tough trading environment.”
Rising rents have caused numerous booksellers to close in recent years with book artwork gallery and bookshop Illustration Cupboard shutting down last month and Big Green Bookshop due to close on 31st January.