It’s no secret that we are seeing a shift in how consumers are spending their time and money, with spend on experiences growing at the expense of purchasing physical items. While this is a move that we are seeing across all age cohorts, nowhere is it more apparent than with the under 30s. Say hello to ‘Generation Rent’.

Although these changing attitudes are having a profound impact on the retail market, it is also opening up opportunities for new concepts centred around rental retail. The growth in rental accommodation, more constrained disposable incomes and an expanding generation of digitally aware, environmentally conscious consumers all significantly contribute to the growing appeal of renting items, as opposed to purchasing them outright, particularly amongst the younger generation.

Rental retail isn’t necessarily a new concept. Back in the 1970s it was very common for people to rent their TVs. However, this shift in consumer behaviour means that we are now seeing the rental economy impact our lives in many more ways, from fashion to furniture through to cars or even dogs through website BorrowMyDoggy.com.

This greater openness to rental services becomes even more apparent when we review private equity and venture capital funding trends. Since 2004 rental retail service platforms have raised a total of £4.3 billion globally, with three quarters of this secured within the last five years, showcasing the significant impact that this sector is having on the retail industry.

US fashion rental brand Rent the Runway could be regarded as the poster child within this space, with its latest funding round giving it unicorn status with a $1 billion dollar valuation. Established in 2009, the online platform now boasts a reported six million customers and total funding of £383.6 million to date.

However, it’s not just new names and concepts that are driving the expansion of rental services. Such is the significance of this growing market that earlier this year Ikea announced the trial of a rental service in Switzerland as part of a move towards circular economy that includes refurbishing and re-selling products, and Urban Outfitters launched its own rental subscription offer called Nuuly this summer.

While many of these emerging platforms predominantly live online, like many other ecommerce brands we are now seeing them make the move into physical space. Rent the Runway has five sites in the US, with its largest (at 8,300 sq ft) incorporating coworking space and a beauty bar, and we expect to see other brands opening debut stores too.

Alternatively, mainstream retailers may also choose to dedicate space in their existing portfolios to their newly developed rental services.

As lifestyles, demographics and environmental concerns continue to change and develop, we can only expect the rise in rental retail to continue and despite the challenging climate within the retail industry, the role of physical space will play a huge role in driving consumer awareness of these new and emerging rental brands.

Further information

Contact Savills Retail