What Changes Will Shape the Future of the High Street
CBRE Unveils Next Eight Insights Shaping the Retail Sector in the Next Decade
London - Moscow, 11 December 2017, – CBRE predicts that the high street will see a transformation, as retail occupiers become more diverse. The physical store will focus more on “experiences”, new emerging brands and changes in lease structures, will play a pivotal role in creating a different shopping experience by 2030.
The new insights from the Future of Retail 2030, by the world’s leading real estate services firm, CBRE, examines some of the drivers that will change the retail sector by 2030.
Within the next decade, the high street will feature more new emerging brands that are experience-driven and connected with the local community. The trend towards shorter lease lengths and more flexible terms will also contribute towards the changing make-up of the high street as landlords seek to experiment with new brands.
CBRE also foresees that the process and the speed of the returns procedure will be more straightforward. Autonomous vehicles will collect returns from consumers’ homes and selected drop off points. Retailers will create predefined return options in a more progressive way, inclusive of prearranged dates and locations.
Andrew Phipps, Head of UK & EMEA Retail Research at CBRE, commented:
“The next ten years will be transformative. We’ll see a new version of the high street; people will shop differently and have different expectations around delivery and returns. There will be increased pressure to provide a seamless experience whilst also creating newness and excitement for the shopper.”
CBRE’s Future of Retail 2030 examines 40 “futurist” insights on how the world of retail will change in the future - amid changes in consumers ‘lifestyles, urban environments, retail operations, logistics and other trends affecting the industry.
This week, CBRE released the new eight insights from the series of 40. The remaining 16 insights will be unveiled over the coming weeks.
The other insights outlined by CBRE in the Retail 2030 series include:
Customisation will become the new loyalty In the social media era, consumers view products as another way to express their individuality. Brands with the ability to tailor products and experiences to meet specific consumer needs are more likely to entice brand advocates and ensure repeat purchases. In the coming years advances in technology and increasingly flexible work systems will create and easier way for companies to customize goods and services in high volumes without significant cost increases.
The sharing economy will be a commonplace The size and influence of many shared-economy-based companies now rivals or has exceeded some of the world’s largest companies. Soon many of the world’s most valuable brands will have their roots in the sharing economy and being able to access rather than being able to own will be key.
Curated retail experiences will be a basic expectation Today consumers expect greater value propositions in an increasingly competitive marketplace and have expressed that they feel more valued and develop loyalty towards brands that tailor their operations to the consumer’s needs. New technology will support the curated experience and retailers will use the data collected from customer interactions to prompt additional purchases, either at the time of the initial shopping trip or at an appropriate later date.
Delivery tracking information will be precise There is still a relatively large delivery window for most items and consumers are leaning towards more precise delivery times if given the option. In the future, the predictive pattern of data will be used more efficient to locate exactly where an item is, allowing consumers to place orders with a high degree of certain delivery time, with accurate estimates given at the time of purchase.
Flexible leases structures will be more common There will continue to be proportion of occupiers that request longer leases but this will be in the minority. We’ll see a rise in independent brands embracing the pop-up model in order to offer more personalised services for specific markets and neighbourhoods rather than one large flagship store.
Consumers will be able to experience their purchase before making a payment The ‘try before you buy’ will grow to be a common retail experience. Virtual reality and haptic technology will allow people to experience items without buying them. These experiences will feel so realistic that it will allow a “fact”-based decision to be made.
To learn more about CBRE’s Future of Retail 2030 go to: www.cbre.com/futureofretail2030
In Q1 2018, the volume of growth in new supply showed an extremely low value and amounted to 37,100 sq m. In January-March 2018, four Class B office buildings were commissioned, the largest of which was the business centre "La-5" near Vnukovo airport.
The limited completions volume will also be common for the following quarters of 2018.
Overall vacancy rate continues to decline for the tenth consecutive quarter, beginning in the second half of 2015. According to Q1 results, this indicator decreased by another 1.3 ppts compared with the value at the end of 2017 and amounted to 12.4%.
In Q1 2018, take-up amounted to 365,000 sq m of office space. This is a record value of the new transactions volume executed for the first three months of the year since Q1 2010 (375,200 sq m).
Users demand was still mainly focus on the lease of office premises. This type of transactions is accounted for 83% of take-up in Q1 2018.
In Q1 2018 the average level of rental rates remained in the ranges of the end of last year.
•According to Q1 2018 preliminary results real estate investment volume in Russia has totaled $150 mln, 4.7 times lower than Q1 2017. For year-beginning low transactions conversion is typical, especially after high conversion level of Q4 2017. Furthermore, investors sentiment was moderate in terms of decision making before March President elections typically resulting to markets volatility.
•Q1 2018 investment volume by 95% is formed by overseas capital, compared to Q1 2017 with overseas investments share of 22%
•Residential real estate investment has totaled $71,5 mln (47% in Q1 2018 investment volume). Office segment share according to preliminary results is 34%, retail sector – 12% and industrial real estate – 7%. A total of c. 80 mln was invested in commercial real estate segments in Q1 2018.
•Prime office yields in Moscow in Q1 2018 were 9.00-9.75%, prime shopping centres – 9.00-9.75% and logistics centres – 11.50-12.00%. In Q1 2018 prime yields range was revised by compressing the lower boundary. Based on further real estate markets recovery and key rate decrease, in 2018 we expect further prime yields compression, started in the 2017 year-beginning.
Despite zero new delivery of shopping centers in regional cities in Q1 2018, construction activity remains high: 10 shopping centers with total leasable area of 298,655 sq m are announced for delivery by the end of the year.
58% or 173,855 sq m of 2018 forecasted new delivery of shopping centers accounts for major cities: Novosibirsk, Yekaterinburg, Ufa, Samara and Rostov-on-Don.
Average vacancy rate in large shopping centers in major cities fell to 6-8% as of the end of Q1 2018. Key trigger of this decrease was low supply volumes over the last two years.
In Q1 2018 a new project of shopping center Mall of Baltia was announced in Kaliningrad (GLA: 42,000 sq m) with opening in 2019.
Russian real estate investment market with a total of $4.9 bln in 2017 has recorded a 3-year maximum with a 9% growth Y-O-Y. To compare, 2016 investment volume totaled $4.6 bln, 2015 - $3.3 bln.
Due to a number of large transactions closed in 2017 retail segment is responsible for a prevailing 32% share in the total investment volume, first time since 2013. Retail segment has experienced the largest in 2017, as well as one of the largest in Russian market transaction on the purchase of Immofinanz shopping centres portfolio. Office real estate segment was second in terms of investment share with 29% in the total investment volume. Industrial and hotel segments were responsible for 10% and 6% respectively.
The volume of overseas investments has reached $785 million in 2017 which is 16% in the total investment volume. Foreign investments has recorded a 4.4 times volume growth and 12 percentage points increase compared to the 2016 historically the lowest result in terms of foreign investors activity.