Online retail penetration may be close to its peak, according to the chief economist at fund house Toscafund Asset Management – and the commercial real estate industry should be prepared for it to complement rather than compete with traditional retail offerings.
Savvas Savouri (pictured) said a slowdown in the internet share of UK retailing over 2019 and the first months of 2020 suggested “the UK had crossed the Rubicon of peak growth in retail internet penetration”.
The Covid-19-driven lockdowns meant that picture failed to become clear last year, he said in a new note, adding: “There must surely come a point where we do reach peak ‘RIP’. From my perspective, I expect this to come sooner than many might otherwise suggest.
“As much as the internet has and is changing our consumer behaviour, we will soon arrive at a point of its peak growth egress onto high streets, shopping centres, and retail and leisure parks. If investors across commercial property are unprepared for this new dramatic change, it will be to their cost.”
Changes in consumer behaviour have led to several “seismic shocks” in commercial real estate since 2008, the economist said. “Whether shopping centres become residential, filled with entirely new forms of retail/leisure space, or indeed are levelled to start again, change will come far more quickly, and less costly, than in previous behavioural reorientations,” he said.
Savouri, who has previously warned of the economic impact of pandemic measures such as homeworking, said it is now clear the country “will certainly fully emerge from our home imprisonment”.
“This will coincide, of course, with an end to our exile from work and leisure places,” he said. “When we return to our old normal, there will be new features. Our high streets, shopping centres and retail parks will be reconfigured. Reconfigured as elements see a change of use. Also reconfigured because long-standing retail units are reduced to rubble and rebuilt, or reopened occupied by new brands and concepts.
“So whilst our consumption from UK homes of goods and services will certainly continue to advance, hand delivery will grow more complementing and far less competing against The Real Destination Thing.”
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