CRE Corner Ep#1 | The current state of retail real estate

David Fuller-Watts, CEO, Kinexio | Mark Bruce | Data and Insights Director

03 February,2025

1 min read

CRE Podcast Ep1 – The shape of retail

Stephen Springham, Partner, Head of UK Markets, Head of Retail Research, Knight Frank

Retail’s resilience amidst challenges

Retail real estate has faced numerous challenges in recent years, from pandemic-driven disruption to economic uncertainty. While 2024 hasn’t delivered explosive growth, it has offered a mixed yet encouraging picture for the sector. As Stephen Springham, Head of Retail Research at Knight Frank, remarked during a recent podcast,

“Retail did okay in the first half of the year but could do a lot better.”

This article explores the state of retail real estate in 2024, examining consumer behaviour, retailer strategies, and property market performance.

A mixed bag of sentiment and spending from retail consumers

The consumer market in the first half of 2024 presented a complex picture. While inflation receded, providing some relief to household budgets, retail sales remained inconsistent.

“Consumer sentiment might be improving, but retail sales have been pretty lacklustre,” Stephen noted.

Despite this, there’s room for optimism. Consumers are gradually regaining confidence, and spending could stabilise in the latter half of the year. Retailers and landlords must focus on creating compelling experiences to attract and retain customers.

Careful and calculated moves by retail tenants

Retailers have learned hard lessons over the past decade. Many now approach expansion with caution, focusing on sustainable growth.

“Retailers that have survived have fundamentally got their house in order. They’re not opening more stores than they need to… it’s painstaking, but better than opening too many and it all ending in tears.” Stephen explained.

This deliberate strategy has helped minimise retailer fallout, with relatively few casualties in the first half of 2024. Retailers are becoming more resilient, adapting to the challenges of a rapidly changing market.

Retail property performance is encouraging

After years of rebasing, the retail property market is finally seeing positive signs. Stephen highlighted this shift, saying,

“We are seeing rental growth again after a number of years of rebasing. Capital values are also increasing, not just in retail warehousing but also in shopping centres and high streets.”

Investment markets, while slow in the first half, are expected to pick up in the coming months. As Stephen put it,

“The second half of the year should be conceivably or tangibly better.”

Asset classes and hierarchies in retail

Not all retail channels are performing equally. Retail warehousing continues to outperform, followed by food stores, high streets, and shopping centres. Stephen described a “very distinct hierarchy” within retail, noting that “the very best shopping centres have high demand for space,” but performance varies significantly depending on location and quality.

Oversupply remains a structural challenge, with some towns and cities struggling to support their existing retail floor space. Addressing this issue will be critical for the long-term health of the sector.

Retail outlook for the second half of the year

As we move into the latter half of the year, several factors point to an improved outlook. Consumer confidence is likely to strengthen, occupiers are maintaining stability, and property performance is on the rise. Stephen cautioned against overexuberance, emphasising the importance of “measured positivity” in investment markets.

The future of retail

The retail real estate sector tells a story of resilience, adaptation, and cautious optimism. While the industry continues to face economic headwinds, shifting consumer behaviours, and structural challenges, there is a clear sense that retail is stabilising and, in some cases, growing stronger.

One of the most important takeaways from the first half of the year is the shift in strategy among retailers. Many brands have moved away from rapid expansion and instead focused on rightsizing their portfolios, optimising store performance, and improving operational efficiencies. This selective approach ensures long-term sustainability and minimises the risk of overexposure in weaker locations.

Retail is evolving rather than declining. The industry’s ability to adapt, collaborate, and innovate will determine its success moving forward. As Stephen highlighted,

“Retailing is for life—it’s not just for Christmas.”

This sentiment reinforces the importance of long-term strategic thinking, rather than relying on short-term seasonal trends or temporary boosts in footfall.

See also

CRE Corner Ep#4 | Retail placemaking in Commercial Real Estate | LiverpoolONE
CRE Corner Ep#3 | PropTech trends with Sammy Pahal
CRE Corner Ep#2 | The power of retail data

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