Ready for anything: the data and trends shaping retail in 2025

After a bruising few years, the retail sector has undergone a transformation on multiple levels, becoming more agile and responsive to change while adapting to changing consumer behaviour and preferences. With interest rates forecasted to fall over the next 12 months and inflation currently sitting at 1.7%, a picture is emerging of an industry that’s optimistic and ready for whatever the future holds.

At our recent Building Retail Resilience webinar we spoke with Stephen Toal of Savills and Kris Hamer of the BRC to get their views on the latest retail trends and the outlook for the sector going into 2025.

Expecting the unexpected

The retail sector has seen off a diverse range of challenges in recent years. Quite apart from the pandemic, brands have faced difficulties as the cost-of-living crisis deflated consumer optimism, while increases in energy costs, the National Living Wage and business rates have applied pressure both on sales and operating costs. In addition to the broader economic trends fuelled by political instability in Ukraine and the Middle East, a number of unforeseeable events have also shaken confidence, from stock issues as a result of the blockage of the Suez Canal to the drop in footfall caused by the summer riots across the UK.

Despite all of this, the retail sector has remained remarkably resilient and optimistic, responding effectively and collaboratively to challenges to come out stronger than before. With an “expect the unexpected” attitude.

The rebirth of social shopping

Customer behavioural trends are contradicting the long-predicted “death of the high street”, with signs of a renaissance in shopping in person versus buying online. Since the pandemic, there are signs that consumers have a renewed appreciation of bricks-and-mortar stores, particularly amongst younger generations for whom lockdown was particularly stifling.

Retailers are capitalising on this trend by investing in larger premises, where they’re able to accommodate a wider variety of stock as well as a greater focus on experiential offerings.

For shopping centres and out of town retail parks, the return to seeing shopping as a social activity is prompting a diversification, with retail parks shifting from DIY, furniture and electrical retailers to a much wider variety of operators, including gyms, medical centres and food and beverage chains. In doing so, they’re seeing an increase in frequency of visits, an evolution from their traditional role as a place to pick up bulky goods to a local community hub.

Rentals on the rise

Recognising the urgent need to support the sector, landlords tended to agree more favourable rental terms with retailers when renewing leases in the early stages of the pandemic. At the same time, retailers took the opportunity to rebase rents and remove less profitable stores, streamlining their portfolios and increasing their agility to respond more quickly to the challenges that followed.

These strategies have paid off, and vacancy rates have remained stable even in the face of high-profile shocks such as the collapse of Carpet Right. Out-of-town locations have proven popular with discounters, and other chains have seen the value of expanding into larger premises to offer the experiential shopping environments consumers increasingly expect.

With widespread optimism around growth, it’s expected that the 5-year leases agreed in the second quarter of 2020 will be replaced with higher rents on renewal, both in city centre and out of town locations.

Data-driven retail parks

The high level of agility and resilience demonstrated within the sector in recent years is driven in large part by an explosion in the quantity and variety of data available to retailers. From advanced footfall analytics providing enhanced consumer spend and behavioural data to a huge range of energy and building metrics, the industry is better-placed than ever to move from old fashioned “finger in the air” metrics to a robust data-driven approach.

While retailers are leveraging data effectively to drive engaging consumer experiences, landlords are also using the same information to make strategic decisions on their portfolios. Armed with a deep understanding of how different brand categories perform, shopping centre owners can make accurate ROI forecasts and confidently invest in the right tenants to develop their sites into successful communities.

A brighter outlook for 2025

While the sector has endured a challenging period, the outlook for 2025 onwards is positive. With interest rates forecasted to fall and declines in sales volume showing signs of stabilising, retailers are optimistic of a return to growth.

While industry experts do not anticipate a return to 2019 footfall levels in the near future, they do highlight that retail spaces nationwide are increasingly vibrant, with many reinventing themselves into community spaces that serve a broader purpose. They are, however, looking to the new Labour government to offer the right support to keep this trend moving. In particular, a reform of business rates to encourage retail growth in less economically active areas of the country is hotly anticipated.

With the glut of electrical and homewares purchased during the pandemic now likely to be nearing the end of their lifespans, it’s thought that consumers who’ve up till now held off from making big-ticket purchases will once again be ready to splash out, boosting non-essential purchases to match the recent positive performance trends across health, beauty and electronics. This has led to some experts, including the New West End Company (NWEC) going so far as to predict a better-than-expected “golden quarter” to round off 2024, with festive spending in London’s West End expected to reach £1.7bn.

Keep on top of the latest retail trends

For more information on the key retail metrics and predictions for 2025 onwards, as well as insights into how retailers are leveraging data to respond effectively to whatever the future brings, watch MRI Software’s Building Retail Resilience webinar.

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