MIPIM UK NEWS: The retail property industry needs to reconsider the true value of shops against the backdrop of the rise of online retail, delegates heard at MIPIM UK 2016.
Speaking on a panel discussion, discussing how technology and experiential retailing are impacting property values, Mark Bourgeois, executive director, Capital & Regional, said: “We have traditionally always talked about a rent to sales ratio to determine the value of shops, which was an easy system, but the typical retailer now is reducing what they are putting through their physical tills in line with online sales.
“But the halo effect of that store being there, and that customers are able to buy online and then return it in store, all drives sales for us as an industry and we need to understand the true value of the retail store beyond the value of physical sales densities. This is something really interesting that the industry should be observing right now.”
Retailers and landlords should embrace this change in consumer behaviour and try to understand it in order to capitalise on rental growth. While online retail is important, retailers and landlords need to also remember that while the amount that occupiers bring in through their physical tills may be reducing, the majority of sales still happen offline.
Andrew Phipps, head of UK & EMEA retail research, CBRE, said: “£300bn in revenue went through physical stores and 85% of sales went through a physical till. While online is still important it is only 15% of retail sales in the UK.”
By introducing more leisure occupiers to their schemes, landlords can also increase dwell time, and in turn rental value.
Bourgeois said: “What leisure is doing to property values is a very location by location specific impact, but clearly the fundamental principal which applies to all locations is that if you create a place where people want to come then then occupiers will want to be there and then values will go up.”
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