Back to School, Back to Reality?
As children go back to school this week, some for the first time since lockdown, I expect that many of us will see some semblance of normality returning to our daily lives.
While Autumn/Winter 2020 normal will certainly be different from what we are used to, importantly it allows us to start planning for a future that includes far more than casual workwear and Zoom meetings.
At P-THREE we’ve been doing our homework on how the retail and leisure property markets are likely to fare over the coming term (ie between now and the end of the year) and, encouragingly, our conclusions aren’t all doom and gloom.
If you are at all sceptical at this point, hear me out. Admittedly, the UK’s macroeconomic prospects aren’t good. Government figures show that our economy shrank by 20% during the second quarter of 2020 and economic experts CEBR reckon that, overall, the UK economy will contract by over 10% by the end of the year.
I certainly don’t wish to underplay the effects this will have in the real world in terms of longer working hours, pay cuts and job losses. And yet… when it comes to the retail and leisure sectors, I absolutely believe there are reasons to be (moderately) cheerful. Here are some of the positive reasons why:
We will continue to shop. It sounds obvious, but as the throng of shoppers back in June showed, backed up by anecdotal reports of footfall reaching pre-Covid levels, the urge to browse in-store remains strong.
We will continue to socialise outside the home. The government’s Eat Out To Help Out scheme has unarguably assisted in re-establishing our confidence in going out, although I should quickly add that getting consumers hooked on long-term discounts is a dangerous proposition.
CVAs are painful but will potentially leave the market in better shape. Stronger retailers and operators boost confidence and resilience.
Some brands are expanding. Beauty and athleisure, for example, have benefitted from lockdown.
Rents and lease lengths are falling. This will help encourage retailers and operators to expand. At the same time, landlords will gain increased flexibility and control over their assets.
Planning changes are afoot. The government’s proposed changes to the UK planning system could remove unwanted retail space and create new (mixed use) opportunities that will benefit local communities and the market alike.
Localism is alive and well. Lockdown has reinvigorated local (particularly suburban) retail/leisure, though places may have to battle to retain customer loyalty.
Capital is available. Lenders and investors are cautious, but they are willing to back projects that present new and tangible opportunities.
We’ll cover some of these points in more detail in future blogs. For now, we are just relieved that the outlook for retail and leisure, while hardly A*, is certainly far more promising than you or I might have dared imagine at the start of the school holidays.
Back to School, Back to Reality?
Article by Justin Taylor, Co-founder P-THREE
