Special report: London continues to move apart from rest of UK retail property market
London is operating in its own micro-climate as retailers within the city continue to enjoy buoyant times and landlords reap the benefits, but it is a very different story around the rest of the country, as highlighted in the latest Midsummer Retail Report from Colliers International. By Glynn Davis
Presenting the report in London last week, Russell Francis, head of valuation at Colliers International, said that whereas vacancy rates in the capital are “minimal” this contrasts starkly with other parts of the UK such as Rotherham with 15.4% vacant units, Liverpool with 11.1% and Cardiff with 11% - although the latter pair have had chunks of new space added.
The difficult times are best highlighted by the Colliers annual rent map that shows the fourth annual decline in rentals - with a 4.4% fall over the past year - as the number of locations where rentals are falling has increased to 34% from the 420 centres sampled. But such is the strength of London that it has been solely behind the 16% increase in the number of locations that have enjoyed a growth in rentals.
“It is very divided, with London the only positive location. It has had a fantastic performance but the north and Wales are showing double-digit declines in rentals. It’s the mid-ground that is suffering,” says Francis.
Greg Styles, head of retail development at Colliers International, agrees: “The reality is that consumers are abandoning mid-market towns so some part of towns will fall out of retail use. The Portas Review raised the issue in the public conscious but it is trivialising the matter and has not gone far enough.”
He cites the £100,000 that has been allocated to each of 12 selected ‘Portal Pilot’ towns as sufficient funds to help the likes of Market Rasen, but that it “will not scratch the surface in Stockton and Stockport”.
Styles points to the trends being seen with international fashion brands – including The Kooples, Kate Spade and Crocs - as highlighting what the UK consumer is demanding today: “After central London these brands only want to be in big cities and often shoppers will look at the goods [in-store] and then order online.”
With a smaller number of stores – located only in key cities - on these brands’ opening agendas Styles say the demand now is for larger units, which is leading developers and landlords to “re-configure stores to satisfy this [new] demand”.
As consumers move to the big city locations to shop, thereby deserting the lower-order towns, Styles says the development in these areas will be “limited for years as they do not need any more retail space”.
In reality there is very little retail development being undertaken in any part of the country. The shopping centre pipeline is well and truly blocked – as the only centre due to come to fruition in 2013 is Land Securities’ Trinity Leeds development.
And out-of-town developments are also very scarce, with Whiteley Shopping Centre in South Hampshire and Banbury Gateway the only key projects due for completion in 2013. Nick Banfield, out of town retail specialist at Colliers International, says this has helped keep vacancy rates down - they rose only a modest 0.3% in 2011, with the collapse of DIY chain Focus playing a big part in this.
Although the prospect of Homebase and Wickes offloading stores over the next few years as leases come up for expiry and they seek reduce excess space, Banfield says there are a batch of retailer looking to expand including Hobbycraft, Oak Furnitureland, Primark, Debenhams, John Lewis with its At Home format, Marks & Spencer, and Next with its new Home and Garden concept.
Many of these retailers are developing online operations, which has led the sector to recognise that consumers are increasingly placing a high value on convenience – more so than on price. This has led to a greater focus on ‘convenience’ stores – especially within the food sector.
Natasha Sunderland, head of communications at Colliers International, says the convenience food market has grown by 40% over the last 10 years, and there has been an increased focus on this part of the market by all the major food retailers.
Stephen Boyce, head of convenience property at Sainsbury’s, agrees that convenience shopping compliments online spending, and states that Sainsbury’s is now on the look-out for new units for its convenience offer: “It’s a key growth market and we’ll be actively looking for more stores over the next few years.”
These units can be derived from a variety of different properties as Boyce highlights existing retail premises, new-builds, mixed-use, former pubs, petrol stations, and old car dealerships as all potentially ripe for conversion into a Sainsbury’s convenience store. The ideal being 4,500 sq ft of trading space on one level with car parking for 10-plus cars, with plenty of passing trade.
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