There will be more churn in property portfolios over the next few years as retailers face up to a new landscape following the UK’s vote to leave the European Union, experts warned at the Local Data Company’s (LDC) Retail and Leisure Summit in London this week.
New research by LDC, which tracks retail and leisure unit openings and closures across the top 650 town centres in the UK, has revealed that net closures increased tenfold in the last two months, compared with the same period last year (676 net closures in July and August, up from 66 in 2015).
“There was a significant slowdown in new openings in the first half of 2016,” explained LDC director Matthew Hopkinson.
“Where we shop and how we shop has changed dramatically,” he added, pointing out that there has been a net loss of more than 5,000 units over the last five years, but out-of-town retail parks have added a net 1,300 units during the same period.
Hopkinson said there is increasing polarisation between locations with low vacancy rates such as Beaconsfield in Buckinghamshire, which has no vacant units, and Burslem in Stoke on Trent, which has the highest vacancy rate at 33.3%.
In terms of larger retail locations, Richmond, St Albans, Cambridge and Chichester are among the best performers in terms of low vacancy rates, contrasted with Wigan, Newport and Walsall, which have a high level of vacant units.
Mike Jervis, head of corporate financial restructuring at professional services firm PwC, said he expects more churn to come, particularly on the outskirts of town centres.
“There are a lot more headwinds this year than last, with Brexit certainly making an impact but also pressures from things like the new living wage and business rates.”
The high-profile demise of BHS and Austin Reed has further compounded the problem of high vacancy rates on certain high streets, the LDC said.
However, Ben Dimson, head of retail business development at British Land, argued that BHS’s collapse could lead to opportunities in many locations: “Two years ago we took back a BHS unit in Chester and in went a Primark and Marks & Spencer, which were more appropriate for that area. We’re now in legals with our other BHS stores and have seen really good demand for that space.”
“There will be some spaces that are hard to fill, but it does create opportunities.”
Vicky Fowler, partner for planning and environment at law firm Berwin Leighton Paisner, said: “Another example is the landlords of the BHS Plymouth store, who are seeing it as a chance to remodel the store and bring it into the adjoining unit, which will revitalise that area.”
Terry Duddy, non-executive director at Debenhams and Hammerson, said: “It is important to note the fact that the figures show it is not the death of the high street but rather the high street is changing … A lot of multiples have closed in tertiary towns but opened bigger spaces in shopping centres. The bigger question is now that the consumer is better off – the Asda income tracker is the highest it has been for years – but why isn’t retail performing better than it has been?”
“Retailers aren’t getting their share of the spending because it’s more into experience – things like beauty, holidays, and food and beverage are doing well.”
He also warned that retailers will struggle to pass on price increases brought about by the weakness of sterling because “the consumer has become so savvy, helped by mobile technology”, which he believes has changed the landscape for retail.
“They are far too smart to take on higher prices so we may see prices held for a while and retailers renegotiating with suppliers.”