Bad News - Landlords predict retail will face highest level of negative growth

Nearly a third of landlords predict that the retail sector will see the highest level of negative growth over the next 12 months, according to RSM UK’s Real Estate 360 survey.

Research commissioned by the audit, tax and consulting firm RSM UK shows that 30% of landlords expect the retail sector to see the most negative growth this year, followed by offices (25%) and residential (16%).

In addition, more than half of businesses surveyed (53%) expect to see a growth in the number of distressed assets in the next 12 months, with 37% likely to invest in distressed assets in 2024.

More than a third of landlords (35%) see access to funding as the second highest barrier to investment, behind economic recession at 53%, followed by business rates (25%) and global shocks (25%).

However, there are signs of cautious optimism for the market, as 80% of landlords feel positive about the real estate sector over the next three years. 25% of respondents also think access to funding will be more difficult in the next 12 months, down from 46% last year. Private equity (42%), high-street banks (37%) and foreign investors (32%) are believed to be the most readily available sources of capital for real estate in the same period.

Damian Webb, partner and co-head of restructuring at RSM UK, says: “The economy continues to be challenging for businesses, particularly retail with the cost of living crisis continuing to undermine retail spending. The UK high street continues to see on-going restructuring with a difficult end to the Golden Quarter as retail sales volumes decreased by 3.2% in December 2024. 

“The subsequent high profile restructurings will put further pressure on landlords exposed to the retail sector. In addition, we anticipate that secondary office properties will see continued decline in value as they struggle to comply with ESG compliance and tenants gravitate to prime properties. Hence, it is not surprising that 53% of respondents think the number of distressed assets will rise.

“More encouragingly, the number of businesses who think access to funding will be more difficult in the next 12 months has nearly halved, which reflects conversations we are having with lenders. Banks are feeling more confident that the market has stabilised, and the fundamentals are there to allow for investment this year.”

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