Chain store retailers seek larger stores in fewer locations
Property advisor CBRE’s Chain Expansion Quarterly, which tracks the cumulative number of branches in chain store networks nationally, found that the total number of chain shop branches in the UK has declined by -0.16% since the end of 2011 - the first contraction since records began.
CBRE’s research showed that the decline was mostly caused by closures in the clothing and card shop sectors. However, expanding chain store traders continued to acquire larger shop units with the net amount of space occupied by chain retailers continuing to increase, boosted by expansion in the supermarket sector.
The company expects net chain shop expansion during 2012 of just +0.5%, down from the long-running rate of 2%-3% per annum. It found that non-food merchandising by grocers and the entry of discounters has had a knock-on impact on niche-players, exacerbating the branch shakeout triggered by the private equity debt legacy and the expiry clusters resulting from shortening lease periods.
The number of bulky goods, service and comparison goods branches fell by -0.40%, -0.92% and -1.09% respectively. CBRE said the decline in service branches such as travel agencies and banks was largely due to the growing influence of online services. However, there was little evidence to suggest that online shopping is impacting retail space demand on the tangible goods side, which CBRE attributes to the growth of store dependent ‘click and collect’. It also found that the branch shakeout to date, mostly via administrations, was due to recession, not the Internet and will continue until there is a sustained upturn in consumer spending growth.
On the clothing side, almost 20% of the increase in space occupied by retailers seen since 2009 has been accounted for by the introduction of additional in-store clothing outlets by supermarkets. CBRE said the recent dent in clothing store numbers caused by Peacocks and La Senza closures has had little impact on the overall store footage gains. Non-food merchandising by grocers has impacted on certain niche non-food retailers, particularly clothing, with new market entrants increasing the pressure on tired brands.
Jonathan De Mello, head of retail consultancy, CBRE, said: "Shoppers are increasingly attracted to larger but more distant trading locations that offer a greater choice of retailers and a more modern shopping experience. This is leading retailers to rationalize their store portfolios, with many chain stores seeking larger units in fewer locations.
"A relatively small number of retail majors are now making most of the running in both branch expansion and internet related investment. Recessionary tail-chopping – the dumping of poor performing branches to boost short-term profitability - is further concentrating market share in the largest markets and among the strongest players, with leasing exceptionally strong in London but patchy in the provinces. Branch expansion totals are still set to end the year in positive territory, but the H1 2012 decline provides further evidence of the fragility of retail sector health."
The number of convenience, catering and leisure branches grew by 1.01%, 2.93% and 0.98% respectively. Although starting from a relatively low base, the growing importance of catering and leisure activities within the overall shopping mix looks set to sustain higher than average branch growth in these sectors.
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