Why the outlet sector is well positioned for continued growth in 2025
Expert Opinion article for CoStar by Christine Grace, Leasing Director at Multi-Realm
January is thankfully over, and with only six weeks or so to go until the start of Spring and new ranges hitting the shelves, now is a good time to take stock on the health of the retail sector and the outlook for the coming months.
A mixed picture
Without wishing to extend the January blues, it is fair to say that retail is facing some challenges. First of all, consumer confidence weakened last month, with sentiment about both individuals’ personal financial situation and about the economy generally declining. On top of that, on a headline basis footfall was down year-on-year in January across high street, shopping centre, and retail park locations.
However, it is not all doom and gloom. UK retail sales in January rebounded significantly from a 3.3% fall in December to growth of 3.4%, while retailers including Next, Marks & Spencer, and Tesco all announced positive sets of results. On top of that, venues like the Bullring in Birmingham and Liverpool One reported strong footfall in January compared to a year earlier, while outlets in Multi-Realm’s own portfolio like the London Designer Outlet (LDO) and Lakeside Village have also seen footfall gains.
For both brands and operators the key in a challenging environment is to adapt to changing consumer trends and adopt a proactive, data-led mindset to ensure an asset continues to meet the needs of a its customer base. That could mean ensuring marketing and promotional activity is tailored to upcoming events, working with retailers to ensure the layouts and product displays are optimised, or taking a step back to assess an asset’s overall product mix. Crucially though, you need access to the right data and the resources and experience to manipulate and use it to inform your decision making. With the widespread use of turnover rents, the outlet sector, where Multi-Realm initially focused, has a head-start in this regard.
Mind the gap
Across the retail sector, we are increasingly seeing a gap in performance with the most well-managed, proactive, and data-led assets outperforming. Importantly, brands have started to take notice and are adapting their strategies accordingly. With our nationwide portfolio, at Multi-Realm we have a unique insight into what is happening on the ground, and on the back of the 100,000 sq ft of new lettings we completed last year, we also know how brands are looking at their store estates. What we’re seeing is that brands are taking an increasingly strategic approach to new openings, and targeting the most well-managed assets that have a strong and sustained track record of performance. For many operators, that means targeting top tier shopping centres, well connected retail parks, and, increasingly, outlets.
The ongoing momentum behind outlets
Outlets is the one asset class within the sector which has performed strongly across the board for a number of years. Outlet villages and factory outlet centres gained 1 million new shoppers between 2022 and 2024, while recent research predicted that outlet sales could grow by 30% to €30bn by the close of 2028[1]. That is backed up by what we have seen on the ground, as both LDO and Lakeside Village had record years last year.
There are a number of reasons why we can expect outlets to continue to outperform in 2025. Firstly, cost of living pressures remain the number one concern amongst consumers and consumer confidence overall remains fragile; as a result, while shoppers still wish to spend, they are being highly selective with regards to where they shop. Secondly, across the retail sector, although consumers are maintaining discipline in their spending, they are increasingly willing to trade up to more ‘premium’ lines, as long as they remain affordable. For example, over the crucial festive trading period supermarket premium own label lines accounted for a record 7% of all sales. That being said, in the UK Christmas 2024 saw all the supermarkets experience an outlet proposition, blending premium lines with promotional pricing.
These trends are set to continue. In its State of Fashion 2025 report, McKinsey found that fashion customers are consistently adopting cost-conscious shopping behaviours, with 60% of customers saying they often try to save money on clothing, footwear and accessories. On top of that, over 70% of shoppers plan to purchase from outlets or off-price retailers in the next 12 months, even if their discretionary budgets increase. And this is far from one-sided; consumer confidence and appetite to spend is cited as the number one risk by fashion executives.
The proof is always in the pudding, and with off-price retailers seeing revenue growth of 1.8x that of the broader market between 2023 and 2024, we can expect to see more and more brands expanding their exposure to outlets.
Value – consumers want it, brands need to prove it, and outlets provide it. With its conveniently located and high quality venues, increasing popularity amongst both consumers and brands, and focus on affordable luxury, the outlook remains bright for the outlet sector.
[1] https://www.across-magazine.com/european-outlet-centres-see-sales-hike-as-rituals-becomes-fastest-growing-brand-in-the-sector/