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
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.
New construction grew 4 times compared to its Q2 value and amounted to 278,000 sq m. More than 80% of new space was leased before commissioning. 62% of new supply represents built-to-suit buildings.
161,000 sq m of warehouse space was taken-up in Q3 2017, which is 2.9 times higher compared to Q2. In Q1-Q3 2017 business activity of retailers continued to be a key driver for demand growth. FMCG & Food prevailed in take-up structure by goods type.
Total vacant space decreased to 450,000 sq m, accounting for only 7.1% of total stock.
Weighted average gross rental rate for A class warehouse reached 5,100 RUB/sq m/year exceeding its 2016 value by 4%.
In Q3 2017, 74,600 sq m were commissioned on the Moscow office market. This volume is the largest quarterly increase since the beginning of the year, however it is 9% lower than the value was in the same period of 2016.
The low new supply volume contributes to the continuing overall vacancy rate reduction. In Q3 2017 this indicator decreased by 0.8 ppts from 15.4% at the end of H1 2017 to 14.6%.
In Q3 2017, take-up is amounted to 255,000 sq m, which is 11% above the value in Q3 2016 and 21% higher than the volume in Q3 2015.
Ranges of asking rental rates remained stable in Q3 2017, but vacancy rate decrease and gradual equalization of the supply and demand balance in the Moscow office market will begin to influence the level of rates that may increase by 3-5% by the end of the year.
In Q1-Q3 2017 real estate investment volume amounted to $ 2.5 billion 35% of which accounted for Q3 2017. Thus, this indicator decreased by 27% compared to Q1-Q3 2016.
Foreign investors activity is increasing on the Russian market. In Q1-Q3 2017, the volume of investment transactions involving foreign capital increased 4.8 times compared to the same period of last year and leveled at $562 million that is 24% in the structure of investments, against 3.4% in January-September 2016.
Investment activity beyond the Moscow region was formed primarily by investment acquisition in St. Petersburg real estate market. Despite the much lower investment volumes compared to the Moscow region, in Q1-Q3 2017 the share of St. Petersburg and the Leningrad Region in investments structure increased up to 24% compared to 10% in the same period of 2016.
Capitalization rates in all segments of commercial real estate have adjusted compared to the beginning of 2017. The compression occurred due to Central Bank key rate reduction and real estate rental flows stabilization.