Retailers and landlords adapting to new consumer dynamics

Retailers and landlords are changing their spaces and services to appeal to changing consumer tastes. Online retailers are opening new physical stores in select markets, while non-traditional tenants from food and beverage to medical clinics and entertainment venues are taking space in retail centres.

Non-traditional tenants make their mark on changing U.S. market

In the U.S., new centre deliveries are still muted, helping to keep vacancy rates stable. Both pure-play online retailers and clicks-to-bricks retailers are increasingly aware of their need for physical touch points with the consumer and are opening new stores. Additionally, a variety of non-traditional tenants are opening spaces in smaller shopping centres with recent strip-centre move-ins including churches, medical clinics and entertainment venues such as axe-throwing and escape rooms. As under performing anchors close and some malls struggle, developers are focusing on building vibrant, live-work-play communities with entertainment and experience a vital ingredient.

Mixed fortunes as consumer spending growth slows in Europe

Declining consumer confidence amid heightened uncertainty caused consumers to tighten their purse strings in Europe’s mature retail markets towards the end of 2018. Combined with unseasonably warm winter weather, the performance of both bricks-and-mortar and online retailers was mixed as competition and discounting impacted margins. Prime rents remained stable however across most European markets, although notable uplifts were recorded across CEE, with Hungary registering 10% growth across all retail asset classes, while upward momentum was also evident in Spain. Wage growth and lower inflation are expected to provide stimulus for retail spending across the EU (28 countries), which is forecast to grow at an annual rate of around 2% in 2019 and 2020.

Experience-oriented tenants remain important demand drivers in Asia Pacific

Experience-oriented tenants, such as sports brands, electronics retailers and F&B operators, continue to be key sources of demand in Asia Pacific. Rental growth varied across the region with prime mall rents edging up in Hong Kong in the last three months of 2018, underpinned by strong sales in some premium and tourist-focused malls. At the same time, increased pressures on national retailers weighed on rental growth in Sydney, while growth eased in Shanghai amid a record supply wave.

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