Retail Market Analysis – June 2016

James Child – Senior Retail Researcher

Agenda

Retail Summit 2016.

LATEST NEWS & ECONOMIC CONDITIONS

INVESTMENT & YIELDS

LEASING, AVAILABILITY & STOCK ABSORPTION

PLANNING & DEVELOPMENT

CONCLUSIONS

Latest Headlines

Retail Summit 2016

Consumer Confidence – OECD, 2007-2016.

Retail Summit 2016.

2007 2007-07 2008 2008-07 2009 2009-07 2010 2010-07 2011 2011-07 2012 2012-07 2013 2013-07 2014 2014-07 2015 2015-07 201695

96

97

98

99

100

101

102

103

Source: OECD [Organisation for Economic Co-operation and Development]

2014: Scottish Referendum.

2015: General Election.

2016: EU Referendum.

Consumer Confidence – OECD, 2007-2016.

Retail Summit 2016. Source: City A.M.

Retail Spend (£BN) – January to April

Retail Summit 2016.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

82,000,308.0

89,923,707.086,022,345.088,077,651.0

91,591,764.093,879,288.095,645,858.0

106,361,223.0103,113,722.0104,682,694.0

TOTA

L UK

SAL

ES (£

BN)

Source: ONS

Share of overall spend coming online, 2007-2016

Retail Summit 2016.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Source: ONS

January 2008: 4.4%

November 2015: 15.5%

Overall Retail Investment

Retail Summit 2016.

SO FAR IN 2016 …

£2.4 BILLION

RETAIL PARKS£228 MILLION

SHOPPING CENTRES£1 BILLION

INVESTED IN RETAIL PROPERTY

Liverpool – Liverpool One. £300M

Slough – Bath Road Retail Park. £93M

Birmingham – Grand Central. £335M

Retail Investment Comparison: Jan-May

Retail Summit 2016.

2012 2013 2014 2015 20160

0.5

1

1.5

2

2.5

3

£1.5BN

£2.3BN£2.2BN

£2.7BN

£2.4BN

TOTA

L AM

OU

NT

SPEN

T (£

BN)

11%

Retail Investment Comparison: Jan-May

Retail Summit 2016.

2012 2013 2014 2015 20160

0.5

1

1.5

2

2.5

3

£1.5BN

£2.3BN£2.2BN

£2.7BN

£2.4BN

£0.7BN

£1.7BN£1.5BN £1.5BN

£1.0BN

Overall Investment (£BN)Shopping Centre Investment (£BN)

TOTA

L AM

OU

NT

SPEN

T (£

BN)

Shopping Centre Investor Origin [2011-2016]

Retail Summit 2016.

UK73.4%

OVERSEAS21.7%

JOINT BETWEEN UK & OVERSEAS4.9% Investors in both

overseas and domestic markets are

exhibiting caution over the EU

referendum…

…Leading to drop-off in both demand and supply for shopping centres this year…

Shopping Centre Investment: What about the rest of 2016?

Retail Summit 2016.

2012 2013 2014 2015 20160

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

H1 Shopping Centre Investment H2 Shopping Centre Investment

Shop

ping

Cen

tre

Inve

stm

ent (

£BN)

£2.8 BN

£4.1 BN

£5.6 BN

£4.5 BN

56%

71%

48%

50%

Retail Summit 2016.

Shopping Centre Investment: What about the rest of 2016?

2012 2013 2014 2015 20160

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

H1 Shopping Centre Investment H2 Shopping Centre Investment

Shop

ping

Cen

tre

Inve

stm

ent (

£BN)

£2.8 BN

£4.1 BN

£5.6 BN

£4.5 BN

56%

71%

48%

50%

Potential for a strong H2 with pent-up supply releasing & more deals concluding…but

risk of over-supply may impact pricing.

Retail Park Investment [£M Year to Date Comparison]

Retail Summit 2016.

2012 2013 2014 2015 20160

100

200

300

400

500

600

£212M

£332M

£479M£514M

£228M

Tota

l Inv

estm

ent (

£M)

Out-of-Town & Shopping Centre Yields

Retail Summit 2016.

2012 2013 2014 2015 20160

1

2

3

4

5

6

7

8

9

10

OUT OF TOWN PRIME MALLS SECONDARY MALLS

‘Typ

ical

’ Ini

tial Y

ield

Lev

el (%

)

~6.2%

~7.25%

~4%

Leasing – National Overview

Retail Summit 2016.

National Absorption Rate:

2.9 years of ready-to-occupy stock on the market.

Average Lease Length:

8.1 Years [down 3% on last year]

Top Four Retailer Sectors:

Fashion [17%]Restaurants/F&B [17%]Health & Beauty [8%]

Homeware [8%]

East of England – Activity up 33%

Yorkshire – Activity up 30%Northern Ireland – Activity up 50%

Scotland – Activity down 12%

East Midlands – Activity down 26%

Regional Y-o-Y change in SQ FT let:

Retail Leasing – Occupier Sectors.

Retail Summit 2016

Top Four Retailer Sectors:

Fashion [17%]Restaurants/F&B [17%]Health & Beauty [8%]

Homeware [8%]

Fashion jumped from 16% last year… helped by the expansion activity of

several national chains…

Other sectors which saw a lift in deals share include…

Jewellery Stores Coffee Shops

Currently 2.9 Years of Stock Left At Current

Take-up Rate…

London, South East & East of England all with

less than 2.5 years’ worth of stock left –

More constrained than the national average.

East Midlands:4.3 years of stock

remaining.

Lease Lengths – 12 Month Average

Retail Summit 2016.

London

South Ea

st

Scotla

nd

NATIONAL

East

of Engla

nd

South W

estWale

s

West M

idlands

North W

estNorth

Yorks

hire &

Humberside

East

Midlands

Northern

Irelan

d -

2.0

4.0

6.0

8.0

10.0

12.0

10.6

9.0 8.5 8.1 7.8 7.8 7.5 7.4 7.3 7.3 7.1 7.1 7.0

Retail Development

Retail Summit 2016.

Retail Development

Retail Summit 2016.

• Three units or more

• 50,000 SQ FT or more.

Our development stats monitor construction of / extensions to retail developments which contain:

Shopping Centre Pipeline – Under Construction

Retail Summit 2016.

2016 2017 2018 2019 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

RETA

IL S

PACE

CO

MPL

ETIO

NS (M

ILLI

ON

SQ F

T)

3,320,205 3,290,963

256,648

1,102,143

Shopping Centres (Under Construction)

Retail Summit 2016.

2016 2017 2018 2019 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

RETA

IL S

PACE

CO

MPL

ETIO

NS (M

ILLI

ON

SQ F

T)Shopping Centre Pipeline – Under Construction and Proposed

Shopping Centre Pipeline – Under Construction and Proposed

Retail Summit 2016.

2016 2017 2018 2019 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

RETA

IL S

PACE

CO

MPL

ETIO

NS (M

ILLI

ON

SQ F

T)

2,308,786

7,084,677

5,002,373

Shopping Centre (Under Construction)

Shopping Centre (Proposed)

3,290,963

Shopping Centres (Under Construction)

Shopping Centres (Proposed)

Shopping Centre Pipeline – Under Construction and Proposed

Retail Summit 2016.

2016 2017 2018 2019 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

RETA

IL S

PACE

CO

MPL

ETIO

NS (M

ILLI

ON

SQ F

T)

Shopping Centre (Under Construction)

Shopping Centre (Proposed)

All Retail Pipeline

Retail Summit 2016.

2016 2017 2018 2019 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

RETA

IL S

PACE

CO

MPL

ETIO

NS (M

ILLI

ON

SQ F

T)

4,473,850

10,218,213

5,735,256

2,095,666

Shopping Centre (Under Construction)

Retail Park (Proposed)

Shopping Centre (Proposed)

Retail Park (Under Construction)

Retail Summit 2016

Shopping Centres (Under Construction)

Shopping Centres (Proposed)

Retail Park (Under Construction)

Retail Park (Proposed)

Pipeline: Risk of Oversupply?

Retail Summit 2016

22.5 Million SQ FT estimated to be delivered by 2019…

10 Million SQ FT estimated to be delivered in 2017…

2.2 Million SQ FT at risk of closure.

Conclusions

Retail Summit 2016.

Brexit-based uncertainty stalling investment.

Yields largely stable – movement on prime malls only.

4% Bump in leasing activity nationwide.

Pipeline of new space healthy – but old space still at risk.

Thank You.

Retail Summit 2016.

James Child – Senior Retail Researcher

Retail Market Analysis – June 2016

James.Child@egi.co.uk

@JamesChildEGi