Retailers increasingly scaling back their expansion plans
Nielsen Harrap, principal consultant at location specialist CACI, says: “This shows that the recession is beginning to bite. In April you had a large number of retailers saying they'll see what happens over the next few months. But they have seen that things have not recovered and it is affecting them all. They were collectively holding their breath but are now consolidating or heading for administration.”
He suggests the shift to reduce space could be affecting smaller market towns the most as there are no signs of recovery in these locations whereas in more high-profile larger retail centres this might not be being felt quite as acutely.
On a more positive note the survey found that the same number of retailers as in April, 50 per cent, were still intending to add square footage in the current financial year and that six per cent were intending to increase trading space by decreasing non-revenue space.
Harrap believes this consistent grouping is likely to comprise the merchants who were always planning to expand, regardless of economic backdrop, because they have a strong offer and regard the current tough market as an opportunity for their businesses.
However, the survey also found that only 28 per cent of respondents are finding plenty of good quality units available. The majority, 61 per cent, reckon the market is still 'hit and miss' when trying to find and secure decent quality units.
“There will be opportunities to secure sites in smaller high streets in market towns that are below the 'mass-to-value' end of the market, but the question is whether they are prime pitch and represent a good deal, and whether therefore retailers really want them,” he says.
The 28 per cent of retailers who are finding it much easier to find sites are possibly those operators such as 99p Stores and Poundland who had difficulty in many locations in the past because of resistance to their propositions. “The mass-to-value market suits them well, especially during a recession, and they are finding opportunities now available as other retailers might not like to take the same risks on such centres,” explains Harrap.
The fact 61 per cent of retailers say they are not able to find quality sites supports the survey's finding that 53 per cent believe lower levels of rents are needed and expect them to come in the future. Harrap suggests: “Landlords probably feel that they've already had to cut into their profits and those respondents expecting further falls are probably being optimistic.”
Although 18 per cent believe rents are now returning to previous levels Harrap says there is little evidence to support this viewpoint and that it may simply be held by those retailers who are still stuck on long leases at over-the-odds levels.
The remaining 29 per cent who reckon the bottom has been reached could be those retailers who are looking at prime retail centres where there is arguably a growing level of competition for units.
Harrap says this might be a result of retailers now choosing to take a less risky stance on their expansion programmes and that this is leading to a larger number of merchants focusing on the same premium units. “This is leading to a polarisation in retail locations with poorer quality retailers in secondary towns versus high profile retailers in prime locations,” he suggests.
There is no such polarisation of respondents' views on the benefits that eating and drinking venues bring to retail developments. An overwhelming 83 per cent believe they are very significant in completing the retail offer at a specific destination. In contrast, only 17 per cent suggested eating and drinking makes no difference to the overall offer at retail centres.
Harrap believes this strong positive feeling towards eating and drinking operators might be because retailers feel they “encourage people to see shopping as more of a leisure activity” and that this is essential at a time when consumers are less driven to shop, because of the effects of recession.
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