Following the vote to leave the EU, there was an immediate fall in consumer confidence. However, the drop went only marginally below the long term average and has since recovered some of the lost ground. The official retail sales figures released for July (the period immediately after the EU referendum) revealed that not only did sales hold up, they actually increased 5.4% year-on-year.
Economic forecasts are not indicating a UK recession but we will inevitably experience a decline in growth. Although consumer spending forecasts have fallen following the result, retail sales are still forecast to remain positive over the next five years, albeit just below the long term average. In the immediate term, we expect big ticket items and homewares to experience the greatest pressure.
Across the first half of 2016 shopping centre vacancy rates have improved across nearly all GB regions. Although retail sales have shown 39 months of consecutive monthly year-on-year growth, footfall is declining across the high street and shopping centre market, indicating a change in trends from fewer but higher spending visits.
Over H2 2016 and 2017, 385,847 sq m of additional shopping centre floor space is under construction and due to open. We continue to see the market dominated by extensions / redevelopment and also an increasing percentage of leisure uses. Councils are playing an ever more important in role in enabling town centre development, stepping in to either directly develop schemes or helping to facilitate them.
There is no doubt investor sentiment was affected in the lead up to and following the EU referendum, with many vendors holding off bringing product to market until after the result. Following the ‘Leave’ result, the uncertainty created will result in investors remaining cautious in the short term. We expect investment volumes to remain low in H2 as vendors and purchasers alike adjust their strategies.