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Insight: step-change for UK shops market as sector polarises

A new report has suggested that the gap between the best and worst retailing locations has become more pronounced despite the fact that average prime rents… View Article

UK HIGH STREET NEWS

Insight: step-change for UK shops market as sector polarises

A new report has suggested that the gap between the best and worst retailing locations has become more pronounced despite the fact that average prime rents and the overall level of empty shops have improved slightly.

In its latest Midsummer Retail Report, Colliers International said that UK prime retail rents are up 1.8% year-on-year which is the best increase since 2008. In addition, the firm found that prime shop vacancy is down 0.2%, marking the first nationwide improvement since 2014.

However, the report shows that the proportion of the 420 locations monitored by Colliers which saw a fall in rents more than doubled, while the volume of shops that have been vacant for more than a year increased by 20%

Colliers’ head of UK retail Mark Phillipson said: “Both these measures had been previously improving during the past two years, and this reverse signals a step-change which is widening the gulf between the best and the rest.”

The firm found that even in London, which has seen double digit rent increases in recent years, rents have only moved up by 3%, and it is predicting that they will remain flat for the next 12 months. Colliers estimates that on Bond Street, one of the world’s most prime shopping locations, around 25 shop leases are being quietly marketed by brands.

Paul Souber, Colliers’ head of central London retail agency, said: “London is still a phenomenally strong shopping environment but the market has cooled. The more positive news is that the capital is still creating new flourishing pitches. The shopping offer on Tottenham Court Road is being transformed and we’ve seen top rents on the street increase by 7.5% – more than double the London average.”

The strongest performing retail market was Scotland where top rents increased by 4.5% year-on-year.

The firm said polarisation of the sector is impacting the attitudes of investors who are buying retail assets. During the past year, Colliers found that the best performing retail-related property assets have been the logistics facilities which help fulfil online shopping orders.

Colliers’ head of retail capital markets James Watson explained: “For the first time, these logistics assets – the ‘shops you can’t shop in’ – are selling at prices which are keener than all but the best trophy retail assets.”

The firm said the retail investment market is experiencing a shortage of stock at present but predicts this may be about to change.

Watson added: “An increased supply of stock from forced sales in the secondary markets may not be that far away. This is not great news for those who are sitting on assets where the debt-value equation is heading in the wrong direction, but it will be positive for buyers who are sitting on a mountain of cash.”

The report also reveals that around 85% of the former BHS stores within the M25 have found new occupiers but this figure falls to around 30% in the rest of the country.

In addition, the research found that retail leases are becoming more aligned to those that prevail in continental Europe as retailers look to secure shorter leases.

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