As declining footfall, spiralling business rates and the ongoing penetration of ecommerce lead to a perfect storm for the shop, Retail Week looks at what the future holds for retail property.

Landlords and developers alike are currently peering through their fingers in horror as their investments fall in value, previously agreed rents are slashed, and shop units are left empty.

The CVA, an insolvency tool used to exit leases and slash rents, is now commonplace as retailers from Debenhams to Carpetright look to reduce store numbers.

While many landlords will argue that the root of this problem lies in poor business management, the sector itself has been quick to blame the rise in CVAs on wider problems: the decay of the high street, the rampant penetration of ecommerce and the spiralling costs of doing business.

Many retail analysts say the industry is going through the biggest upheaval it has seen since the financial crash in 2008 and the effects of this period of flux on the makeup of high streets, the role of the retail store and who will own and operate those units in future are likely to be profound.

Adding to these seismic shifts is the evolution of new technologies. Advances in everything from AI to autonomous vehicles have the potential to disrupt how consumers interact with retail space.

In this long read, Retail Week probes into what the future of retail property will look like by 2030.

The future of the high street

Property graphics high st

The UK high street is in crisis.

Last year, the number of shop closures hit record highs. According to research from PwC, compiled by the Local Data Company (LDC), store openings slumped to their lowest levels on record, which led to a net 2,481 stores shutting – the biggest ever seen.

A cocktail of issues – increasing rents and business rates, twinned with declining footfall, growing ecommerce penetration and spiralling costs such as the minimum wage – have all contributed to a perfect storm hitting retailers hard. This has made store closures inevitable for some chains.

In May, the latest figures from the British Retail Consortium (BRC)’s vacancies monitor painted a grim picture. National town centre vacancy climbed to a four-year high of 10.2%.

Empty shop

Empty stores are deterring shoppers and retailers from the high street 

Vacant units feed into a vicious circle that harms town centres. As BRC boss Helen Dickinson says: “Empty shopfronts, particularly for larger stores, deter shoppers from an area. This effect can be cyclical, with the long-term decline in footfall pushing up vacancy rates.”

And so the cycle continues. Empty units lead to fewer people coming to the centre, which means falling retail sales and less inclination from retailers to invest in stores in the area. But, like all cycles, they can be broken.

To see where the high street is going, it is worth taking a look back at where it has come from. For British Land head of retail asset management Matt Reed, the UK high street was traditionally a “complete hub of communities” and it was only in the post-war era, with growing consumption and car ownership, that retailers came to dominate town centres, pushing residential property out to the margins.

In the 1970s and 1980s, the concept of the big-box, out-of-town, mega retail schemes began to gain traction, as did the proliferation of the large, destination shopping centre. However, the basic principle behind running a successful retail business remained much the same – if you wanted to grow, you needed to open more stores.

It was only with the advent of the internet and the growth of ecommerce that the face of retail began to rapidly change, and businesses started to close shops.

Overexposed

As ecommerce penetration has grown, and home and office delivery have become more convenient, there is a general consensus among retail property experts that the UK retail sector has massively over-expanded in terms of store space.

Harper Dennis Hobbs head of retail consultancy Jonathan De Mello believes UK retailers are overexposed in town centres and high streets by anywhere between 20% and 30%.

He says a lot of what now constitutes retail property on the high street was once residential housing and, as more and more retail sales move online, some retail space will return to residential.

“It’s coming full circle because a lot of those retail spaces are going to turn back into residential. If for no other reason than there’s a lot of value in that for some of these property developers,” he says.

Knight Frank partner Stephen Springham agrees retail space needs to be repurposed but can see just 5% to 10% being converted into housing as fragmented high street ownership makes this difficult.

Rent cuts and shorter leases

Unsurprisingly in a landscape where more retailers are looking to close stores than open new space, retail rents and lease lengths are reducing.

As Next boss Lord Wolfson said earlier this year: “We do not have too much space, we have too much rent, rates and service charge. The amount of retail space we trade in the future will depend on whether the cost of retail space adequately reflects the reality of retail trading conditions.”

Lord Wolfson index image

Next chief executive Lord Wolfson

Wolfson went on to predict that shops will be “much less expensive” in 15 years’ time. He assumes market rent – the rent which could be achieved for a new lease – is 25% lower than the rent it has locked into for all leases that are more than three years old, and forecast that in an environment of 10% like-for-like sales decline, market rents would continue to decline by 5% a year after 2022.

However, Springham believes retail rents will start growing from 2022. He acknowledges this seems “implausible” now but says five years is a long time in retail.

“It’d be naïve to think they’re going to be in freefall forever; they will recover and probably by 2030 they’d be back to where they are now,” he says.

The length of shop leases has also shortened, giving retailers greater flexibility. In 2014, the average retail lease was 10 years. Now this sits at five years with a three-year break clause, according to De Mello.

Springham believes leases will not go below five years, though he suggests annual break clauses could become the norm.

The idea of retail property coming full circle is one a lot of the experts return to. For Ellandi chief executive Mark Robinson, as the high street moves into the 2030s, buildings will return to the purpose they served historically.

Robinson says the future high street will look more “Victorian” with people “making, repairing and selling stuff on the ground floor, having a small office on the second floor and living on the third floor, all in the same building”.

But if retail is less prevalent on high streets, what will occupy that space?

A high street with more than retail

The 2030 high street is going to have a lot more mixed-use property than it does currently.

This trend is already beginning to happen, with some of the largest institutional landlords in the UK, such as Hammerson, looking to steadily minimise retail use on some of their shopping centre schemes in favour of more food and beverage, leisure and even possible residential units in future. The same trend will extend to the high street.

A number of property developers are already adding more mixed-use elements to town centre regeneration schemes.

“Having a mix of categories will be important. Office, residential and retail intertwining. That way, you’ll have your customer base there already” 

Jonathan De Mello, Harper Dennis Hobbs 

Barry Jessup, director at property developer First Base, says co-working office space, high-end food, drink and leisure offerings, and even experiential hotels, are increasingly added into designs of what once would have been completely retail or residential schemes.

He says: “Even a decade ago if you went to investors saying you needed some money for a mixed-use development – maybe a bit of retail and food and beverage on the bottom floor, with office space, or purely residential, above – most of them didn’t want to know. Now though, it’s basically the only kind of conversations investors want to be having.”

De Mello says mixed-use developments effectively ensure a consumer ecosystem for town centres. “You’re going to want the retail to stand on its own two feet and, to make sure it does, having a mix of categories will be important. Office, residential and retail intertwining,” he says.

“That way, you’ll have your customer base there already. Residential for the nights and the weekends, offices for the weekdays. That way retailers and those offering food and beverage and leisure can expect a decent quantum of footfall and spend off of that.”

Reed says British Land is increasingly looking to design schemes that “feel and operate like neighbourhoods” and is focused on changing its portfolio to have “fewer, but better, retail assets in better locations, but also those that can provide a mix of use”.

These uses are tailored for each location. Reed says in London and other major city centres there will be more offices with some retail and catering units, while the edge of city centre schemes will serve residential purposes as well.

5G and the rise of high street working

Nash Bond director Richard Scott says technology like 5G will also come to benefit more regional town centres because, as the technology improves, more and more people will be able to work effectively from home or shared office spaces.

WeWork is looking to take space in retail stores

WeWork has pondered taking space within UK retail units

More workspace is being introduced to town centres. Co-working giant WeWork has even looked to take space within retail businesses. It was in talks to take on excess space in Debenhams stores last year.

Having more office space in town centres will have an effect on footfall.

Scott says: “If you think about working habits, as technology improves people will work from home more and that’ll become more of a factor. Co-working will also become much more of a feature in terms of a town centre environment over the course of the next decade or so.”

Who will own the high street?

The focus on more mixed-use developments moving towards 2030 may also bring longer-term benefits for landlords in terms of outside investment.

Ellandi’s Robinson says a number of UK pension funds, once the investment staple for the UK high street, have been retreating in recent years as retail property has become a less sound investment.

This has led to the rise of smaller owners, which have been less able to make the requisite investments to improve their properties and deal with the headwinds facing the sector.

He believes more successful mixed-use developments will see such funds return to investing in UK high streets and shopping centres.

“I can see pension funds owning a lot more of our town centres in 10 years’ time, because what we’ll have done is reposition those town centres into true, mixed-used locations where they’re not buying into a retail income stream, but a retail income stream augmented by the inflation-linked income from everything else around it,” he says.

Landlord and tenant partnerships

The way landlords and tenants interact with one another will change to become more of a partnership.

One commercial property agent says many landlords view retail tenants as “customers”.

“They only really talk to them when they’re discussing the deal. Once it’s signed they say, ‘Right, best of luck, speak to you again in a decade or so when the review is up.’ There’s not a lot of communication at the moment.”

However, the increasingly tough retail climate will force landlords to invest more in their retail units.

Scott says: “Landlords, instead of perhaps writing big capital contribution cheques to convince tenants to take a shop, may actually end up writing a big cheque to invest directly in what they own, which are therefore more capable of offering a relatively fluid tenancy to the occupier.”

“Ultimately, if the occupier then goes, they are then left with a good retail shell for the next tenant to come in and occupy.”

KLM Retail partner Will Thomas says this would be beneficial to landlords in the long term. While investing in fit-out costs is more expensive upfront, landlords could charge more in rent from retail occupiers afterwards.

“Clearly by fitting out that space, to a larger degree you’re decreasing the entry cost for the occupier in terms of fit-out, but there would be an expectation from landlords that they’d get a return on that investment they’re making,” he adds.

Local authorities become landlords

Thomas says by 2030, town centres and high streets will need to differentiate from one another.

“Towns aren’t going to be able to just look like clones of one another any more. They are going to need to better reflect the needs and wants of the local community and use the space accordingly.”

Savills director of commercial research Marie Hickey says historically strong covenants of larger chains meant landlords were more likely to sign leases with them. This led to the “cookie-cutter high streets we see today”.

Thomas believes local authorities will need to play a bigger role in the future in helping to curate space in town centres.

Stockton-on-Tees is one council doing just that.

Economic growth manager for the council, Chris Renahan, says Stockton has had an “overreliance on retail over the past 20 to 30 years, to the point where nearly every building in the town centre had a retail use”.

Stockton is regenerating its town centre

Stockton is regenerating its town centre with award-winning results

The town now has a lot of vacant units. To reinvigorate the centre, the council decided to focus on what was unique about Stockton. 

Chief executive of Stockton Borough Council Neil Schneider says: “We needed to look backwards, to our soul, history and heritage, and reinvent ourselves. We’re a welcoming place with a sense of spirit and entertainment; we’re a market town. We’ve got to position ourselves there.”

The council set about reinventing Stockton as a kind of outdoor community centre, according to Schneider, making it a stage for events, specialist and traditional markets, with pleasant, family-friendly public spaces.

“We wanted to create a town centre that people might choose to visit for reasons other than just shopping, especially as there’s a very successful retail park jam-packed with big names just 10 minutes away,” says Schneider.

The rise of the indie

Thomas predicts retail rents and lease lengths will continue to be driven down. There is already evidence this is starting to happen. According to research from property firm CBRE, rents at prime high street shops fell 1% in the first three months of 2019 – greater than the 0.4% decline in the final two quarters of 2018.

Psyche in MIddlesbrough is a big anchor tenant on the high street

Psyche in Middlesbrough is a big, independent anchor tenant on the high street

This trend is forecast to continue, and the new landscape will give rise to more independent retailers and pop-ups on the high street, with a particular focus on locally made items and produce.

This change is already beginning to happen. Data released by the LDC and the British Independent Retail Association (BIRA) in May showed independent store openings were up 4% year on year in 2018, and independents accounted for 64% of all retail and leisure units in the UK.

Scott predicts “the ongoing renaissance of local, independent retail is only going to continue”. He says this feeds into the growing concerns millennials and generation Z have towards issues around sustainability and the provenance of goods.

 

Redesigning the high street around driverless cars

Technology is also going to have a fundamental impact on the future high street, with the advent of 5G, the increasing sophistication of AI and robotics, and the promise of autonomous vehicles.

Driverless shutterstock

Property developers are already factoring driverless cars into their plans

Jessup says many property developers are already designing future schemes around the proliferation of things such as autonomous vehicles and even drone delivery.

“We’re already looking to put drone delivery spaces into our buildings,” he says. “And, right now, we’re rethinking the need for car parking. Dropoff-type spaces are becoming more important than parking in town centre locations. Also, assuming these vehicles are going to be electric, there’s a technical requirement to make sure you have charging points in place.”

Jessup says autonomous delivery drones and vehicles will also change the nature of the high street, which for the past few generations has been designed around the use of the car and delivery vehicles.

“When that’s no longer the case, you could pedestrianise large swathes of the high street because, with the flick of a switch, you could divert autonomous vehicles away from those places. Suddenly, these high streets can be redesigned around humans which, in turn, will make them much more pleasant environments and more people will want to spend time there.”

The future of the shopping centre

Property graphics master shopping centre

Much like the town centre, the destination shopping centre has not been immune to the travails of the wider retail sector.

Footfall has fallen over the past few years and large institutional landlords such as Intu and Hammerson have responded by pivoting away from a predominantly retail-focused tenant mix to look more at leisure and food and drink offerings, which drive footfall.

Research by Harper Dennis Hobbs has tracked this trend. In 2012, the research found 13% of the overall floor space of large malls was given over to such offerings. It has since risen to 25% in 2019. De Mello predicts this could reach 35% by 2030.

He says: “A lot of new schemes are being designed with food and beverage in mind because owners aren’t stupid. They know there has been a lot of leak to online from stores, so you can’t just fill a mall any more with retail.”

The large landlords are also beginning to consolidate and streamline their portfolios. Taking Intu and Hammerson again, both suffered substantial falls in the values of their respective portfolios in 2018. Intu’s assets tumbled 12.9% to £9.17bn, while Hammerson’s suffered a 5.9% fall to £9.9bn.

To tackle these chunky write-downs, both property giants are looking at similar strategies. They plan to offload secondary and international schemes and, at the developments they retain, they will create more experiential propositions focusing on leisure, food and beverage and events, which will almost certainly come at the expense of retail space.

Focus on experiential

Hollywood-Bowl-at-intu-Lakeisde

Hollywood Bowl is part of Intu Lakeside’s new leisure offering

These changes are already afoot. On a recent visit to Intu’s Lakeside flagship in Essex, the landlord’s regional managing director for the South, Rebecca Ryman, began the tour at the centre’s dedicated food and beverage level on the third floor.

She was also keen to show off some of the centre’s new leisure and experiential offerings, including a brand-new Hollywood Bowl and a Nickelodeon entertainment centre, as well as future sites for an indoor trampolining area and mini golf.

There are also plans to open a 14,500 sq ft Market Hall, the first outside of London, which will offer seven different restaurants, as well as pop-up areas for food trucks and two bars.

Ryman says this new area, which opens out on to manicured lawns and water features, is part of encouraging people to visit the centre for reasons other than shopping.

She says: “Once everything is complete, it’s going to offer a one-stop destination for all kinds of people.”

Hammerson is becoming increasingly focused on its larger, more urban locations and is advancing its ‘City Quarters’ strategy, which it describes as a focus on “vibrant mixed-use neighbourhoods beyond pure retail”.

Hammerson managing director for the UK and Ireland Mark Bourgeois says: “We’re seeing more integration in the way that people shop, live and work.

“For us, that means we’re pushing our strategic City Quarters concept – looking beyond the strong retail and leisure base we already have and incorporating other uses, including the private rental sector and additional commercial and hotel space.”

Bourgeois says this will mean people are not just coming to Hammerson schemes to shop but will be using them for all purposes “because they’re also living and working in the vicinity”.

What retail will be left?

As larger, more traditional brands retreat from many shopping centres, LDC and BIRA research shows independents are going some way to plugging the gaps.

In 2018, 1,951 new independent stores opened in UK shopping centres, 1.1% growth compared to 2017, and the LDC said this showed “shopping centre owners are becoming increasingly creative with vacant space” and are willing to split space “into smaller units that are more suitable for independent occupiers”.

Big landlords are already looking at indies to plug holes left by traditional retailers, with schemes such as Hammerson’s LinkStreet pop-up mall, which connects Birmingham’s Bullring and Grand Central, and Land Securities’ Black Box Revolution concept that it launched this year at Trinity Leeds, bringing new names to centres.

Black Block Revolution in Trinity Leeds brings new names to the shopping centre

Black Box Revolution in Trinity Leeds brings new names to the shopping centre

Bourgeois says Hammerson has pledged to move away from “traditional high street fashion brands” to focus on more contemporary offerings. Hammerson is aiming to cut department store floorspace by a quarter and traditional high street brands by a fifth.

He envisages future Hammerson schemes being anchored by large-format leisure offerings or “real statement flagship fashion brands and even co-working space” in what would once have been large units given over to department stores. He also expects more direct-to-consumer brands such as Samsung and Nespresso to take space.

Hammerson has begun planning future schemes with more charging ports for electric cars, more dropoff space for autonomous vehicles and ride-hailing apps instead of large carparks, and even drone delivery bays to better facilitate deliveries.

In the end, says Bourgeois, the aim is to make the centres and schemes “far more interesting and pleasurable places for the consumer to be”.

Service-orientated secondary schemes

As the bigger landlords focus on turning their prime locations into destination experiential schemes, many are already looking to divest their secondary location portfolios.

Savills’ Hickey says secondary shopping centres will likely become much more “service orientated” by 2030, particularly with the recent trend towards local authorities looking to invest in secondary schemes.

She says councils could “consolidate all of their doctor’s surgeries and other council services to take up some excess retail space”, which will drive more footfall, increase local connection with the scheme and “rejuvenate the retail in the area that’s left”.

“Between 2016 and 2018, local authorities spent more than £800m snapping up 26 shopping centres in struggling town centres”

Research by Knight Frank showed between 2016 and 2018, local authorities across the UK spent more than £800m snapping up 26 shopping centres in “struggling town centres” across the country.

One such local authority was Stockton-on-Tees. In December, the Durham-based council asked councillors to approve borrowing of up to £30m to “take advantage of the opportunity to buy key sites and assets in the borough’s town centre as and when they arise”.

In May, the council completed the £7m acquisition of the 200,000 sq ft Wellington Square shopping centre, which it plans to convert into a mixed-use development.

Thomas says models like Stockton will likely be the future for more local shopping centres. As he says, what landlord wouldn’t want to “work with a progressive local authority to offer something like a library or some other educational or medical building, which can really sit at the heart of that local community and drive footfall?”.

The future of retail parks

Property graphics master retail parks

The out-of-town retail park has also been battling against the headwinds buffeting the retail sector more widely in the UK.

The European Retail Parks – What’s Next? report, published by property firm Cushman & Wakefield (C&W) in May, found retail park development in the UK has “declined significantly since its peak over a decade ago”, with the volume of new retail park completions falling 18% year on year in 2018.

C&W senior research analyst Silvia Jodlowski says: “Recent trends indicate the retail park markets in the UK and Western Europe are at or near maturity.

“We are seeing a growing proportion of smaller retail parks and this, alongside the growth of online retail, suggests the pace of new development will continue to ease and we are unlikely to see development volumes get close to the previous peak within the next 10 years.”

“Many retail parks will look to transform themselves into effectively pseudo-shopping centres”

Trevor Wood, Trevor Wood Associates

The report noted that new retail park developments increasingly include “a leisure component to support the attractiveness and dwell time of the shopping destination” and flagged that new developments were trending towards generally smaller schemes “of between 53,000 sq ft and 86,000 sq ft” based around smaller-format discount supermarkets and value retailers.

Much like the high street and shopping centre, the retail parks of the future will also need to adapt to stay relevant and become “destinations” for the whole family. This means having less retail space and more food and beverage and leisure offerings.

Trevor Wood, founder of Trevor Wood Associates, says this trend is already happening at many UK retail parks.

“We’re already seeing a lot of what once were purely retail parks – predominantly offering electrical, DIY and furniture retailers – now becoming retail and leisure parks. By 2030, I can only see that increasing as many retail parks will look to transform themselves into effectively pseudo-shopping centres.”

Rise of the super-park

However, despite some of the data showing that retail parks are getting smaller, Wood points out that a number of the most successful retail parks – such as Fort Kinnaird in Edinburgh and Fosse Park in Leicestershire – are looking to expand their physical footprints in order to accommodate more mixed use.

Fort Kinaird

Fort Kinnaird in Edinburgh is looking to expand its footprint to become mixed-use

He says: “You’ll end up with more super-parks, if you like, in terms of size. Back in the early days, retail parks were 30,000 sq ft or 40,000 sq ft. You’re now looking at 500,000 sq ft or more for some of them and that’s a trend that’s only going to continue.”

Wood says there are eight retail parks over 500,000 sq ft and predicts this will grow. He says these locations will seek to offer “something for everyone in the family”.

While developers are increasingly making retail parks mixed-use, the cost of out-of-town land and retail rents continue to be much cheaper than on the high street or in primary shopping centres.

A bright future

De Mello believes despite the increased penetration of ecommerce by 2030, retail parks will continue to serve a valuable purpose for retailers – and landlords.

“Some of these parks are under-rented [when the rent is less than the estimated rental value], which is why lots of funds are looking to buy portfolios of retail parks. They offer better margins for retailers and lower rents too compared to the high street or a prime shopping centre. I think retail parks have quite a bright future,” he says.

Specialised real estate investment funds such as NewRiver are already looking to capitalise on this and are buying up retail parks across the country. In May, it acquired four for £60.5m and formed a joint venture with another investor to manage the assets.

Meanwhile, retailers are vying to take advantage of the cheap rents on offer, such as Shoe Zone. Boss Nick Davis says it is focusing on expanding its portfolio of out-of-town, big-box stores, which he believes will drive “sizeable revenue increases” in the medium term.

“In January, we had 25 [big-box] stores. We’ve been very busy since then and… we expect to have 45 such stores open by December.

“Our medium-term plan is to have 100-plus big-box stores, which would represent quite a sizeable increase in revenue for us.”

A number of other retailers are also taking advantage of lower rents on retail parks – including Hotel Chocolat and Card Factory.

Retail parks have also been central to the growth of Iceland’s The Food Warehouse fascia.

Food Warehouse is a business built on retail parks

Iceland’s The Food Warehouse business is based on retail parks

The Food Warehouse, a cross between an Iceland supermarket and a bulk-buy proposition such as Costco, only launched in 2015 and this month opened its 100th store. Iceland managing director Richard Walker plans to have “between 300 or 400 Food Warehouses” in out-of-town locations.

The success of The Food Warehouse on retail parks has spurred competition. Tesco is looking to open more of its value format Jack’s on retail parks – including one next door to a Food Warehouse in Liverpool.

Futureproofing retail parks

Despite the interest in retail parks from landlords and retailers, experts believe there is a need to futureproof these locations.

The traditional focus of these spaces has been on providing plenty of car-parking. However, in the long term, this could be a weakness, not a strength, if autonomous vehicles take off.

Property services firm Colliers International’s head of UK research and forecasting, Mark Charlton, says retail park operators will need to spend heavily on redundant car parks, which “will lead to lost income and a property that needs to be redeveloped”.

Thomas agrees: “In a world where everywhere is accessible because you’re using transport as a service and not reliant on parking, then actually I think more people are going to be engaging in a town centre environment, as opposed to out-of-town.”

This could spur new uses for the retail park, one of which could be as distribution space.

A report by Deutsche Bank in 2017 flagged that there was such growing demand for storage space that more traditional retail parks could well be converted into warehouses.

Could the retail park be the home of healthcare?

KPMG retail partner Don Williams says out-of-town retail parks would be the perfect place to consolidate currently disparate health and wellbeing offerings – such as doctors’ surgeries, dentists and physiotherapists – in one place.

“The way the NHS is going is that in the future people are only going to be going to hospitals for serious injuries or treatment for diseases. Basically, all prevention, diagnosis, recuperation, rehabilitation will be placed in one central location and it’s something that can’t be delivered over the internet.”

Hickey agrees and believes local authorities could also take retail park space as a base. “By 2030, I can see councils consolidating all of its doctor’s surgeries and other council services, such as educational services, to take up some of that excess retail space, which can rejuvenate the retail in the area that’s left.”

She points to a number of schemes in the US that have already begun to follow this model, including Austin Community College, which purchased the 1.2 million sq ft Highland Mall in Texas and turned it into “the galaxy’s largest learning emporium”.

The retail park of the future is going to look different from how it does today. Yet, as Woods points out, the retail park has always had to adapt in order to survive. While the rise of ecommerce and the struggles of many of its once staple occupiers such as Toys R Us, Blockbusters and Staples have taken their toll on the retail park, they have also provided opportunities for growth.

With an increased focus on dining and leisure and the likelihood of many landlords working in collaboration with local authorities to house medical services, educational offerings and even libraries, the retail park will play a key role in the sector in 2030.

The future of the store

Property graphics master store

Most, if not all, retail property experts believe retailers are overexposed in terms of physical space to the tune of anywhere between 20% and 30%. Over the coming years, retailers will look to close their poorest-performing stores through lease expiries, break clauses or CVAs.

The growth of ecommerce has contributed to this over-exposure and this shows little sign of slowing. Research published this month by consultancy Retail Economics and law firm Womble Bond Dickinson predicts ecommerce will come to account for 53% of total retail spending within the next 10 years compared with 19.2% today.

This shift to online shopping will fundamentally change the types of retailers occupying physical space by 2030. De Mello predicts by 2030 the UK’s high streets, shopping centres and retail park units will be predominantly dominated by fashion brands and grocers. Much of everything else, he believes, will be purchased online.

“People will always want to try on clothes so clothing will be a key product category in-store and, beyond that, it’ll be a mix of experience stores and stores with brands who may not have taken a store before, taking space because it’s going to be cheaper than ever before.”

City centre showrooms and out-of-town fulfilment hubs

Next Oxford Street 2018 2

Next expects many stores to be loss-making ecommerce service spaces

The growth in ecommerce and blurring of clicks and bricks will lead to increased polarisation between primary locations – such as large city centres and destination shopping centres – and secondary areas such as regional town centres and retail parks.

Primary locations will take on the role of showrooms for brands, while stores in secondary locations will be used as distribution hubs or spokes and to facilitate click and collect.

Hickey believes stores in primary locations will become marketing tools for retailers in high footfall areas – allowing for customers to come in, interact with a product and then either order it online or in-store to be delivered to their home.

New technology will help to make these showrooms interactive and virtual, and augmented reality will allow shoppers to ‘try on’ clothes or see how homewares or furniture will look at home.

Meanwhile, secondary stores will be used to service a retailer’s online business.

Next boss Lord Wolfson is already planning for this. Earlier this year he set out his 15-year stress test where he envisaged operating just 270 stores – down from 500 currently – and 120 of these could be loss-making, operating to service ecommerce orders via click-and-collect and return.

Zara has more than doubled the size of its store in Intu Lakeside to add a dedicated online area for the purchase and collection of orders.

The hi-tech ‘chute’ allows customers to scan a QR code or punch in a PIN, which then sets a robotic arm into motion organising packages and delivering them to the customer within seconds

Click-and-collect is central to Zara's new format

Click-and-collect is central to Zara’s new store format

Some stores – particularly those on out-of-town schemes and in regional town centres – will also become vital cogs in retailers’ wider distribution networks and help to facilitate speedy delivery.

This is similar to the model used by Argos, which stocks more than 20,000 products at local hub stores, enabling them to be dispatched more quickly for its Fast Track same-day delivery.

There may well be fewer stores by 2030 and the fundamental nature of what they do may well have changed. However, what all agree on is that stores will still exist.

As KPMG’s Williams says: “Humans are social animals and therefore people will want to participate in stuff together – whether that’s experiences, leisure activities or shopping. If anything, as technology seems to contrive to push humans further apart, I think you will see people try and come together more.”