Landlords adapting to structural shifts with new tenant mixes and growing focus on customer service

Across the globe, the continuing emphasis on customer experience means that the share of non-retail tenants, including food and beverage outlets, lifestyle brands and fitness centres, is expanding, with landlords actively seeking to respond to changing consumer tastes.

Pressures persist in U.S. retail market as landlords adapt

The third quarter saw a pause in the recent softening of the U.S. retail sector, as net absorption rose 70% quarter-on-quarter. National vacancy remained flat, while rents increased an above-trend 4.4% year-on-year. However, previously announced store closures are now taking effect and impacting the market – over 2,500 retail locations closed during the first half of the year, with Sears, Bon-Ton and Toys ‘R’ Us among the major players closing their doors.

Real wage growth in Europe to provide a boost to consumer spending

Despite rising headline inflation rates in Europe, there is evidence of a revival of wage growth which, although tentative, should boost real incomes over the medium-term. Retail sales are forecast to grow by 2.0% on average a year until 2020 across the EU (28 countries). Prime rents generally remained stable in most European markets during Q3 2018, although notable annual growth of 5% or more was observed for shopping centres in the UK and for retail warehousing in the Czech Republic and Slovakia.

Landlords in Asia Pacific focus on experience and service

Like other regions, retailers in Asia Pacific – notably in Australia and China – continue to focus on customer service, in the form of new technologies and concepts, and shifting tenant mixes, including food and beverage operators, furniture stores and online brands. Limited rental growth was observed across the region, with the exception of Hong Kong, where shopping mall rent rises were driven by select premium malls and tourist-oriented centres.

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