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Property Special: Bricks and mortar still key to retail growth

The news that Tesco has downgraded its trading profit forecast for 2014/15 to between £2.4bn and £2.5bn from an initial forecast of £2.8bn to £3bn shows that despite the green shoots of economic recovery, which has enabled some to flourish, retail remains in a precarious state.

Little wonder then that property portfolios are under serious consideration.

We delve into the big issues in this report, our second Property Special this year. First, we examine how rising occupancy costs all too often act as a deterrent to the opening of new stores.

One retailer pushing ahead with store openings is Debenhams. We speak to its property director Rob Hadfield, who tells us that with competition rife to secure the best locations, good relationships with landlords and local authorities have never been more important.

This spirit of working together is essential to the future of London’s premier shopping destination, Bond Street, as it vies to hold its own against luxury newcomers such as Westfield London’s Village area and a revamped Covent Garden. The street lacks a unified direction, with fragmented ownership reducing its ability to make the same joined-up approach as seen a stone’s throw away on the Crown Estate-owned Regent Street. We analyse the challenges it faces here.

Next, we look at how retailers’ store requirements are being transformed by the rise of ecommerce and click-and-collect.

We then examine the state of play among the supermarkets. Last month George at Asda toppled Marks & Spencer as the second-largest UK clothing brand by volume, while Lidl launched a full womenswear range. The competition is hotting up.

Finally, our focus shifts to the sportswear arena, where mainstream fashion chains such as H&M and Matalan are challenging the big brands with their own offers. And you only have to look at last month’s opening of menswear chain Open by JD Sports Fashion to see that the sportswear sector appears to have the same idea.

While there is still a lot going on in terms of openings, fashion retailers will remain cautious with expansion as they aim to balance the books and stave off the administrators.

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