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| 1 minute read

Back to the future?! - An update on the future of retail property

The retail sector is (still) in crisis. Although the Covid 19 pandemic has exacerbated this trend, it has been clearly visible for years and has not changed in the post-Covid 19 era.

While the online market sale has grown steadily since the early 2000s and now stands at 13.4 per cent, the overall retail sales are declining. In the food sector, the online market sale is still at 2.9 per cent, but in the fashion and consumer electronics sectors more than 40 per cent of sales are made online, according to representative surveys.

This raises the question of whether retail property still has a future. Especially in the fashion sector, the consequences are already clearly visible in the form of consolidations and closures. Well-known major clothing chains such as H&M have closed around 20 per cent of their stores during the pandemic phase. As a result, even in prime locations, significant vacancies or significant rent reductions can be expected in the medium term to counter the horror of empty shop windows in city centres.

But what happens to retail properties that are no longer able to find tenants in the long term, especially in locations that are neither premium nor first-class? It is clear that a successful transformation of retail property cannot be achieved by following a one-size-fits-all approach, but requires a thorough analysis of the specific location, the relevant market conditions and the specific structural conditions in order to be successful in the long term. 

Due to their visibility, urbanity and transport links, city centre locations present different requirements and challenges than suburban or greenfield sites, and therefore different opportunities and constraints. For example, a greenfield site on the outskirts of a large city may offer potential for leisure development due to its generous open space and parkland, whereas an inner city site in a very central location tends to offer different potential, e.g. for tourism.

For this reason, it is essential for potential purchasers and sellers, as well as tenants and landlords of such properties, to work out sustainable and profitable solutions on a technical, operational and legal level as part of a well-founded due diligence process. 

The 2023 commercial real estate outlook indicates there may be challenges ahead. Retail is at a crossroads, and the future of office space is unclear.


real estate, retail property, sustainable, dd, covid-19