Vacant retail property - the end of the road or a new opportunity?
Although CBREs UK Property Market Index for January 2015 reports that the annualised total return on retail property reached almost 16% by November/ December 2014, from a low of zero growth in January 2013, all the indications are that capital and rental growth has now slowed by 2-3% points from last years peak, following seven quarters of growth. Commentary by Graham Wallace, Senior Business Strategist, Esri UK
But the pattern of activity across the UK is perhaps of more interest than average trends. CBRE report that while Central London prime retail rentals showed a 9% growth in 2013, and 6.3% for the last 12 months, prime rentals for shops in the rest of the UK either fell or remained flat over this period. The impact of a succession of retailers going into administration means that it’s not uncommon to see vacancy rates of 20-30% in secondary or tertiary centres.
In 2011 the Portas Review covering the Health of the High Street proposed a number of courses of action to revitalise Britain’s High Streets. Practical suggestions such as changing parking restrictions, encouraging local markets, amending business rates, permitting short term lets for pop-up shops and encouraging local entrepreneurs to create specialty shops were embraced by a number of Local Authorities and have been translated into viable programmes. A recent report from the Department for Communities and Local Government tracks the progress of a number of these initiatives.
But what of those centres where things have not improved? Does the increase in home shopping and home delivery, working alongside the increasing trend towards more concentration of retail spend in the hands of the multiples, now mean that there is a real need to contemplate wholesale conversion of retail property to residential use? The same question may also be asked in relation to the secondary and tertiary office space markets in provincial centres.
There have been previous downturns so, it’s instructive to contemplate that, in the past, low-cost retail space contributed to the development of concepts such as self-storage, health aids and mobility for the aged, gyms and PC clinics.
This tells us that, one way or another, today’s problem could become tomorrow’s opportunity.
Graham Wallace is Esri UK’s Senior Business Strategist with over thirty years business planning and programme management experience gained in the IT, financial services, telecoms and retail sector.
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