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The property sector is changing. Are you?

The way people shop has changed. In 2017, 5,855 fashion retailers, travel agents and home stores were driven off the high street in part by the continued rise of shopping online.1 While this trend outperforms the rest of the market, businesses are starting to rethink the role of their high street stores.2

But this isn’t the only area of the property market that’s evolving. Traditional office space is also taking a hit. Take-up of space by flexible office groups jumped to an average of 7.5% of the commercial property market in 2017, up from 2% in 2016.3

From retail properties to industrial units

Increases in online shopping trends have had a dramatic effect on high-street sales with online brands such as ASOS and Amazon providing a more convenient and always open option.
While these brands use industrial units for storage, their flexibility means they can be used in many ways. A trade counter or collection point can allow businesses to maintain the face-to-face element of purchasing.

What does this mean for the retail property market?

With retail properties taking a hit, industrial spaces are set to become more profitable as high street retailers move their businesses online.4 The take-up of industrial space by online retailers has increased by 731% in the last decade.

2017 saw a record £11bn invested in the industrial sector.5 Meanwhile, retail spaces are expected to become more adaptable going forward, with integrated workspaces and experiential pop-ups looking to attract more shoppers to the high street.

From the traditional office block to flexible working spaces

Shifts in attitude brought in by the Millennial generation are having a huge impact on the traditional 9-5 office role. As many as 87% of full time UK workers would like a job that lets them work off-site at least part of the time.6

As a result, the traditional office block is becoming less and less practical for modern day employers. Hot-desking, shared workspaces and social hubs are proving more attractive to Millennial workers.7

What does this mean for the commercial property market?

The days of the traditional office block are nearing an end. In London, expansion in flexible office space saw a rise of 50% year on year between 2011 and 2015.8


As a developer, landlord or investor you should make no mistake - flexible space is here to stay. One leading property consultancy forecasts that by 2030 as much as 30% of all office space will be occupied on non-traditional leases.9

Is it time to diversify your portfolio?

The property market has seen huge changes in the last decade. Mass migrations from retail to industrial and from office blocks to social hubs, suggest that a diverse portfolio may now be the best strategy for investment.

If your property portfolio isn’t as diverse as you’d like, it doesn’t mean you are on a losing streak. While selling up and investing in new ‘on trend’ property could be the answer, it’s also worth considering renovation or even construction. For example,

  • a traditional office block could be converted to allow flexible workers to occupy the space.
  • extensions to existing properties could also allow for more storage and allow a business to follow the online shopping trend.

Remember, property is a long-term game and the potential cost of owning vacant properties is high.10 Addressing these trends now could help save you both lost income and unwanted costs.

 

Sources:

[1] https://www.theguardian.com/business/2018/apr/11/tough-year-high-street-internet-shopping-weak-pound
[2] https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html
[3] http://workplaceinsight.net/flexible-and-coworking-offices-to-account-for-ten-percent-of-uk-property-market-by-2027/
[4] https://www.savills.co.uk/insight-and-opinion/savills-news/225528-0/take-up-of-industrial-space-by-online-retailers-grows-by-731--in-under-a-decade
[5] https://www.savills.co.uk/research_articles/229130/239042-0
[6] https://www.telegraph.co.uk/women/work/flexible-working-not-just-mothers-says-largest-ever-study-uk/
[7] https://www.telegraph.co.uk/business/ready-and-enabled/millennials-in-the-workplace/
[8] http://www.jll.co.uk/united-kingdom/en-gb/Documents/Valuations/Central%20London%20Office%20Market%20Report%202017%20Q3%20FINAL%20LR.pdf
[9] https://www.propertyweek.com/comment/rise-in-flexible-space-is-set-to-transform-industry/5090719.article
[10] https://www.jelf.com/articles/the-risks-of-owning-a-vacant-property/

https://www.savills.co.uk/blog/article/241330/commercial-property/retail-sector-is-well-equipped-to-harness-structural-changes-ahead.aspx

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