Online giants, like Amazon, are having a profound effect on the commercial property market as the value in retail property is set to fall by 15.9% this year as real estate owners and investors now seek to accelerate efforts to lure online-centric consumers back onto the embattled British high street new research has revealed.
2019 is set to be another tough year for Britain’s high streets as businesses continue to grapple with rising costs, subdued consumer confidence and an increase spend online. Job losses and store closures are forecasted to rise by 26,918 and 3,764 respectively compared with 2018 across the retail and hospitality sectors.
Those forecasts set the stage for the year ahead, according to Altus Group’s annual Commercial Real Estate (CRE) Innovation Report, which surveyed over 400 major property owners and investors from around the world, each with more than £200 million of assets under management.
62% of major U.K. property owners and investors say that e-commerce businesses, such as Amazon, are disrupting the commercial real estate industry. Real estate executives say that this disruption is such it is having a “profound effect” on their decision-making with 78% saying ‘experiential’ retailing, customers which prefer to spend on experience, is now impacting on their investment decisions as retail real estate is set to undergo rapid transformation to repurpose spaces for engaging experiences.
Brands and retail owners now see experience as a way of fighting back from the competition of online retailers with this trend flittering into other types of uses as property owners and investors see experiential properties, creating communities around the property, as a way to generate greater value from their buildings.
New generation shops offering dazzling hi-tech experiences using augmented and virtual reality are part of the solution according to Professor Bamfield at the Centre for Retail Research who says “shops of the future will have virtual reality at the heart of them where customers can try products in immersive 3D and share their experience with family and friends” which Bamfield says is all part of the “edge” traditional retailers can gain over their online counterparts so it is no wonder that 52% of U.K. property owners and investors lead the world by making either a direct and/or direct investment in companies developing the technology.
Altus Group Managing Director Guillaume Fiastre says the industry’s valuation of retail properties had dropped significantly because of challenges facing the retail sector, but remains upbeat, saying, “Retail of the future will use bricks-and-mortar spaces in a very different way mixed in with leisure and lifestyle residential spaces, for example. The most successful retailers – the survivors – are learning to draw in their customers with the promise of a personalised experience. Technology makes that all possible, but it still needs a strong human element.”
“The growth of online retailing, which had been seen as a difficult trend for property, is one property owners and investors can now take advantage of to drive revenue.”