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Market Commentary

​​​Weekly Retail & Leisure News - 19​​ July​​​, 2016​​​​​​​​​​​​​​​​​

True value of physical space revealed

New research from Verdict and British Land has revealed that 89% of all retail sales in the UK ‘touched’ a physical store last year, either through physical sales, ‘click and collect’ or via browsing in a shop before purchasing online. The study sought to identify the share of online sales that touch physical space. In 2015, £278bn of UK retail sales touched a store, providing a 5% boost to the £266bn of retail sales made physically. Despite the fact that the UK is one of the most advanced online retail markets in the developed world, with internet sales accounting for c.15% of all retail sales, this study demonstrates that the value of the right physical space remains as strong as ever. It also highlights the growing importance of seamless omni-channel retailing, which we explored in our recent article, ‘Destination Retail: A glimpse into the future’.

Further evidence of the ongoing resilience of UK physical retail came from Poundland’s agreed £597m takeover by Steinhoff International last week. The South African retail group said Poundland, which operates more than 900 stores across the UK, Ireland and Spain, and employs 18,000 people, would be a ‘complementary fit’ to its expansion plans in the UK and the rest of Europe. Last month, Poundland reported a fall in full-year profits as it admitted the integration of 99p Stores, which it bought in September last year, had placed a strain on its business. Steinhoff owns 40 retail brands in 30 countries, including Bensons for Beds and Harveys in the UK.

And finally, SuperGroup has reported a 16% year-on-year rise in pre-tax profits to £73.5m, as sales increased 21.3% in the 12 months to April 23, boosted in part by the addition of 136,000 sq ft of new store space. Commenting on Superdry's full year results, James Dolphin, head of Pan-EMEA Retail Agency at JLL, said: "The impressive first half total sales growth from Superdry was driven by the retailer's successful international expansion across Germany, Italy and Spain and into the US, demonstrating the resilience of retail in key global cities across the world. The retailer also has a strong pipeline of store openings planned ahead to the end of 2017, which chimes with the general level of demand we are seeing for the right physical space in the right location. International retailers are increasingly focussing on measured and balanced growth across global, mature and growth markets, as identified in our recent Destination Retail report.​”

On the impact of Brexit, Dolphin continued; "Despite the uncertainty in the lead up to the UK's EU referendum vote in June, Superdry's results show that consumers haven't on the whole been deterred from making purchases. While big ticket discretionary spending, including overseas holidays, cars, home improvements and other higher value retail purchases are more susceptible to a slowdown in consumer spending post Brexit, mainstream retail and leisure is likely to remain more resilient."

Please click through to access JLL’s latest UK Brexit Briefing Note. We will also be producing a broader European perspective over the next few weeks.

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