UK Retail Market 2024: Following the aftermath of chain stores closures in recent years

Shoppers in the UK have been hit with many retailers closing down following the COVID-19 pandemic. Almost 5,000 UK chain stores closed in 2023 at a rate of 14 a day, these include well known chain brands such as Boots, Costa, Wetherspoons, Argos and Iceland. However, some of the chain stores stated after the closings they would be relocating, for instance, Marks and Spencer announced in 2023 they would be closing 67 of its stores and relocating 10. There is some uncertainty whether 2024 will be the year to recover as there is expected greater financial and political stability to support the growth of the economy, particularly the retail industry.?

The Outlook of the UK Retail Market 2024

Following the closure of chain stores throughout the UK, 2024 might hold some hope in recovery. Consumer confidence remains a significant factor to whether retailers will experience an upturn. Positive indicators hinting at recovery this year include falling inflation, high employment, better spending intentions, national insurance and other budget giveaways, according to PwC. Despite many closures in 2023, there was an increase in new store openings in mainly fast food franchises and drive throughs but these new openings were outside city centers and their success was still not enough to counteract the 2023 store closures. According to CBRE, low performance is expected to continue into 2024, with advantageous growth not appearing until later in the year. It’s also important to note that supermarket chains were the leading UK retailers in 2023. Convenience schemes that produce day to day essentials will continue to be well frequented, whereas treat spending will be saved for regional schemes with a diverse and experienced consumer mix. Repurposing will stay a vital priority in 2024 for landlords as the continual growth of online shopping and decline of demand remain present.?

How Consumers Online Presence has Impacted the Retail Market 2024

Online shopping has become very popular in the UK for consumers, as they are able to purchase a variety of goods online conveniently, with quick delivery times allowing customers to receive what they purchased within a day or week, eliminating the need to visit physical retail stores. According to CBRE UK Real Estate Market 2024 report, consumers' online presence remained stable at 26.6% however, it is estimated to increase even further at 28% by the end of 2024 which is good for retail stores and investors. As they will be able to increase their profitability margins and maintain a higher competitive advantage over other retailers as long as demand for online shopping remains high, and for investors an increase in profits will consequently lead to an increase in dividend for investors.

However, the impact of consumers transitioning from purchasing goods at physical stores to online purchase has resulted in the high number of retail stores that are vacant and currently not in use. RICS UK Commercial Property 2024 report suggested that the demand for retail stores to be occupied remained largely subdued, as the 1st Quarter net balance reported a -10% rate. Which means that the vacancy of stores are expected to increase, as businesses and consumers have found other alternative ways like online shopping to purchase their products and make profit.?

What is the Government’s Plan to Solve High Vacancy Rates for the Retail Market

Between 2019 and 2022 during the Pre and Post Covid-19 period, many retail stores were closed by the government to reduce the impact of Covid-19 spreading between consumers and employees; this has led to an increase in vacancy rates. CBRE UK Real Estate Market 2024 report, indicated that Vacancy rates increased to 11.7% similar to the vacancy rate of 2022, which suggests that there is a lack of improvement or determination by retail owners to open their shops. Many Retail owners reported either relocating their shops or closing down permanently because of the poor business rates systems, higher corporation tax, and the lack of support given to smallest businesses and start-up retail companies entering the market. The Labour Party after securing the electoral votes have promised to, replace to the business rates system to a new format, Cap corporation Tax at 25% allowing businesses to pay less money to the government after profits are made, which will allow retailers of closed stores to reopen decreasing vacancy rates and increase the Retail Real Estate market confidence for investor. Lastly, the Labour party has also proposed to support independent retailer businesses to break into the retail sector to compete with other retailers, increasing the retailer investment volumes, as it is 30% down year on year according to CBRE UK Retail Market report showing no improvements.??