Retail didn’t die; it merely reset

I had breakfast with the CEO of Hammerson, Rob Wilkinson, at The Silo Hotel last week. It was one of those conversations that forces you to rethink a narrative we’ve all become comfortable with. If you’ve been paying attention over the past few years, you’ve probably heard some version of this: retail is dead, e-commerce has won, big malls are dinosaurs.

Except, sitting across the table, listening to a business, which was “on its knees six years ago”, talking about growth, expansion and rising values, it is evident that the story has evolved into something different. 

Retail didn’t die; it adapted. And in some areas and cases, it has come back stronger.

Wilkinson put it bluntly: “The past 18 months have shown how the retail market has transformed.”

What’s changed is not demand but rather behaviour. It’s the “renaissance of retail”, as Wilkinson calls it. 

The rise of platforms like Amazon forced retailers to rethink everything. But instead of replacing physical stores, online has ended up reinforcing them.

“The market now understands you need to be online and offline,” he said.

Omnichannel isn’t a buzzword anymore; it’s essential for survival. And most importantly, it’s profitable.

Hammerson said the most valuable customer today was the one who interacted both digitally and physically. They spent more, returned more often and engaged more deeply with brands. 

Courier services are expensive and retailers are slowly but surely realising that they cannot solely absorb the costs anymore. When you want to return an unwanted item, retailers encourage you to come into the store for the return — most times this results in the same customer purchasing more goods from the store.

That has triggered a new trend we are seeing globally: fewer stores but better ones. It’s not about scale and aggressive store roll-out nationally anymore; it’s about chasing quality spaces in better locations. 

Instead of 150 mediocre stores scattered across a country, brands want flagship space in the best-performing centres with the strongest footfall.

Wilkinson called it simply: “You get the best or the rest.”

Hammerson’s portfolio reflects that strategy. It has 10 core-city dominant centres across the UK, Ireland and France, all in dense, well-connected urban nodes. As for vacancies? They’re nearly full — 96% occupancy, with assets in Dublin and Marseille approaching 99%.

In real estate, high occupancy plus rental growth doesn’t just improve income, it compresses yields and drives value. Hammerson’s UK portfolio is trading at net yields of 7% to 8.5%. That’s expected to tighten, which means property values go up.

If shopping for physical goods isn’t the main driver of people physically walking back into malls, what is?

The answer is experience. 

“The real driver bringing people back is experiential retail,” Wilkinson said. Think less “buy and leave” and more “stay, engage, return”.

In one of its Bristol centres, Hammerson introduced a new-format luxury cinema. Not just any cinema but a destination. Footfall extended into the evening, meaning restaurants and late-night retailers could benefit from shoppers’ increased dwell time. 

The asset’s economics have changed. With unexpected insight twists that no one expected. Gen Z love big shopping malls. “They’re one of the biggest contributors to footfall and spending,” he said.

After being locked out of physical experiences during Covid, they’ve come back with the intent to socialise, shop and spend. Retail has become cultural again. 

When it comes to Hammerson, it has hidden value sitting beneath its mall portfolio too. 

That value being a lot of land. Across the centres sits about 30 hectares of additional space that has an estimated value of around £300 million (about R6.8 billion). Undeveloped land gives optionality. 

“We can develop it, recycle capital, or hold,” Wilkinson explained.

In Dublin, Hammerson has tested this. A residential tower with 107 units, built-to-rent, integrated into the retail environment. A mall on your doorstep is a great accessory to a residential offering like this. Convenience is key. 

It’s a model that feels familiar if you’re watching what’s happening in places like Waterfall City or parts of Cape Town. Retail is evolving into mixed-use urban infrastructure.

Then there is the tech layer that we do not see. Hammerson has invested heavily in data and technology inside its centres. Something far more sophisticated than your standard footfall counter. 

Its systems can (anonymously) track customer movement, understand behavioural patterns and even assess how shoppers respond to advertising and store layouts.

“It’s transformational compared to what we had before,” Wilkinson said.

Incorporating data science into the shopping experience is how the mall can continuously improve the shopper experience. It changes everything from leasing decisions to tenant mix to rental strategy.

Why should South Africans care about this? Here’s the part that makes all of the above more than just an interesting European case study:

A third of Hammerson’s shareholders are South African. The Public Investment Corporation and Coronation Fund Managers are among its largest investors. And the company is listed on the Johannesburg Stock Exchange. That means South African capital is exposed to this retail recovery story.

If global retail real estate is repositioning, stabilising and in some cases growing again, what does that mean for how we think about listed property locally?

For years, the topic of listed property has been a difficult conversation in South Africa. Covid hit valuations, interest rates squeezed yields and confidence fluctuates.

But sitting in that room, listening to a business that has repaired its balance sheet, repositioned its assets, improved occupancy and is actively looking to acquire, we see that the listed property is not a static story; it’s cyclical and strategic.

Hammerson is looking ahead to acquisition opportunities, with several large UK retail assets expected to come to market as overleveraged owners exit. It is preparing to buy when others are forced to sell and that is its next play.

There’s a tendency in property to latch onto simple narratives like office is dead, retail is dead and everyone is moving to Cape Town. But when it comes to this asset class, retail didn’t disappear; it has reset.

The weaker assets struggled for a long time, while the stronger ones adapted. Now, the top performers are evolving into more complex and diverse spaces than traditional malls. They are becoming places where people don’t just shop but also spend time, live and connect. Perhaps this is the lesson from the retail sector worldwide today. 

Focusing more on what type of retail survives rather than whether it will survive. If the future of retail is fewer, better, more experiential spaces in prime locations, then we don’t have to worry about whether malls are obsolete. Rather, we should see if we have been looking at the wrong malls all along. 

For South African investors with exposure to companies like Hammerson, here’s food for thought: Are we underestimating the comeback of physical retail because we’re thinking about it the way it used to be?