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Public cuts to hit North the hardest

Research into empty shop space has exposed a severe North-South divide and planned Government spending cuts are set to make it worse.

According to the Local Data Company (LDC), town centre vacancy rates have risen from just over 12% at the end of last year to 13% for the first half of 2010.

Although the amount of vacant retail space is growing at a slower rate than last year, the combination of the recession and consumers nervous about October’s announcement on public spending cuts means that high streets and town centres are likely to be hit even further. This is especially true in the north of England.

Of the towns with the highest percentage of vacant retail space, only three are in the south of England, while Bristol has the lowest percentage of vacant space with half that of the highest, Blackpool, where almost 30% of retail space is empty.

Of the 63 large centres analysed by LDC, only eight showed a consistent improvement over the year, including Bath, Guildford, central London, Cardiff and Liverpool. Just 25 of 400 medium-sized centres consistently improved over the period and all but one of these - Grantham - was in the South.

Vishal Moudgil, owner of kidswear store Bang in Blackpool, says that the empty space is increasingly noticeable. “The council has put banners and graphics on the glass so it doesn’t look so ugly. Where there used to be about 10 busy streets there are now two,” he says.

The LDC is warning that Government public sector cuts are likely to hit big northern towns and medium-sized centres worse than other areas because of the high concentration of public sector workers in these places, and that this will have a significant knock-on effect for retailers.

Matthew Hopkinson, business development director at LDC, predicts the VAT increase and fierce competition from new sources like the internet will exacerbate the issue.

“In light of these new and fast-growing ‘off-the-high-street’ channels, will we ever need these vacant shops again? Those that survive [will need to focus on] service, quality of offer and price in order to thrive,” he says.

Calls for action

The British Property Federation (BPF) is calling for the Government to implement its planned support measures for regional centres sooner than April 2011, when they are currently scheduled to launch. The measures include proposals for Local Enterprise Partnerships, the £1bn Regional Growth Fund and a National Insurance concession for companies hiring new staff.

BPF chief executive Liz Peace says: “The problem is exacerbated by the continued imposition of empty property rates [fees for empty properties], which has forced landlords to pay money in tax they could have used to make their property more attractive to tenants.”

Property firm CB Richard Ellis has researched where the public spending cuts will hit retail hardest, by showing the percentage of workers employed by the public sector region by region. Areas including Wales, the northeast of England and Scotland all have above-average rates of public sector employment, and are bracing themselves for some of the severest reductions in consumer spending.

Blackspots

But the increase in empty shop space is not just about the recession and spending cuts. Many big bricks- and-mortar retailers have long been trimming their store portfolios.

According to CB Richard Ellis research published last week, there are longer-term trends that are also helping to create blackspots of empty shops. In 1971, retailers typically needed to trade from 200 locations to cover 50% of the UK retail scene, but by 2008, this number had fallen to 90 due to the increasing focus on city centres and major out of town malls.

Jonathan De Mello, senior director at CB Richard Ellis’ retail consultancy, says this is threatening to erode the effectiveness of secondary towns.

He adds: “There’s been a decline in secondary shopping centres for some time and the impact of the internet and the recession has exacerbated it.

“Retailers now want fewer stores and to focus profitability on larger stores, and as people travel further or prefer to shop in different places and buy from the internet, larger businesses need fewer stores to reach the same size market.

“Secondary centres and smaller retailers in these areas will continue to struggle without working harder to differentiate their offer and marketing themselves,” he adds.

Rental divide

However, the message is that even pro-active retailers will find it difficult to turn around declining high streets, where property ownership is often fragmented between different landlords, and getting businesses to work together can be an uphill struggle. What’s more, the only places where rents are going down is in places with empty stores, so retailers are unlikely to want to open there, leading to a vicious circle of decline.

In big retail centres the story is different. Rents have increased and the lack of new development means less bargaining leverage for retailers when it comes to negotiating leases.

Moudgil says many of the vacancies in Blackpool are a result of retailers relocating to the new Houndshill shopping centre and that while landlords are keen to fill space to avoid empty property rates, that can result in less than appropriate adjacencies for fashion retailers.

“There are a lot of charity shops moving in and now there’s a YMCA Shop next door to Topshop,” he says.

Matthew Weedon, communications director at the BHA-BSSA, which represents independent retailers, is helping the British Retail Consortium compile a report and action plan, the 21st Century High Street,to tackle this issue. He says local authorities need to do more to protect town centres from out-of-town developments.

“Out-of-town centres are a threat to town centres but high streets aren’t dead by any means,” he says. “However, things like the Government’s localism agenda means that as decisions are devolved down there are likely to be more inconsistencies nationally. We have to find a solution because retail is an essential part of town centres.”

Empty shop space by % in the UK

23.7

DONCASTER

19.5

LEEDS

24.6

BRADFORD

28.9

BLACKPOOL

20.4

MANCHESTER

21.3

SHEFFIELD

23.8

WOLVERHAMPTON

22.9

NOTTINGHAM

21.1

GRIMSBY

21.4

KINGSTON-UPON-HULL

Data supplied by LDC

 

 

Readers' comments (1)

  • Martin Ailion

    When landlords start to realise that lower rents might be a start to make empty units more attractive, councils and government that "out of town" developments are killing town and city centres, then empty units might be taken up.

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