Shop vacancy problem is misunderstood, says KPMG/Synovate Retail Think Tank

Based on KPMG/Synovate Retail Think Tank – White Paper #12

 

A new report from the KPMG/Synovate Retail Think Tank (RTT) has found that recessionary effects on retail are being largely misunderstood and one key effect is simply a speeding up of the inevitable decline of tertiary shop property.  

 

Even in buoyant economic periods, vacancy levels in traditional retail properties have remained stubbornly high, usually hovering at 10% or so.  Some of this vacant property is effectively obsolete for shopping purposes and the recessionary shakeout is accelerating the growth of property obsolescence.  The RTT urges local authorities to acknowledge the realities of the situation and where appropriate re-zone shopping that is clearly redundant for other uses.  Charging rates for empty shops that have little hope of re-use for shopping purposes is a tactic likely to acerbate the underlying redundancy problem - not resolve it - if re-development is not viable.

 

As the recession continues, there has been much talk about how shop closures are changing the face of high streets and shopping centres across the UK.  In its latest white paper, the RTT debated the question What impact do shop vacancies have on towns and cities across the UK and what can be done to address the problem? (available at www.retailthinktank.co.uk) There is plenty of discussion and research on the subject.  For example, Experian figures suggest that one in seven UK shops – some 135,000 units – will be vacant by Christmas 2009.  However, one in eight or one in nine are usually vacant anyway.  RTT members consider that store closures are a long-term structural issue, rather than simply a short-term cyclical effect of the recession.  Shopping habits have been changing for many years, with consumer demands for greater choice, in larger purpose-built stores, increased price sensitivity and more mobility leaving many small traditional shops surplus to requirements. Vacancy rates in tertiary locations were high well before the onset of recession.

 

Retailers have been retrenching into larger markets for more than 40 years, increasing the rate of shop redundancy in many peripheral High Street and neighbourhood shopping locations.  A lot of the property relinquished by retailers has been filled by service operators but neighbourhood shopping, and tertiary shopping generally has tended to suffer.  The current recession is simply speeding up the process.  The RTT believes that much of the peripheral small unit shopping that is vacant and in some cases has been vacant for years, is no longer viable for shopping purposes and should be used for other commercial or residential uses.  The situation will not improve on its own. Government and local authority intervention is required to tackle empty, obsolete property through planning. 

 

85 trading locations now attract half the population for comparison goods shopping, compared with 200 forty years ago, highlighting that this shift has been underway for a very long time.  The RTT members point to the comparative lack of empty units at regional shopping centres such as Brent Cross, Bluewater, Lakeside, Metro and Meadowhall and the rush to cherry-pick Woolworth’s stores in the best locations a few months ago.  Even during a harsh recession, demand for quality space remains strong. The problem lies with the poorer quality retail property and the blight which obsolete property causes.

 

Structural changes and the shakeout in the tertiary retail property looks set to exacerbate the spiral of decline in many smaller trading locations.  Local authorities of towns at risk of decline have the challenge of how to handle dwindling numbers of retailers seeking space in low productivity markets and how to put empty sites to their best use: residential, office accommodation, catering or leisure for example.  It may be difficult for local authorities to face these hard realities but these changes will happen eventually with or without their intervention and by acting now they can at least prevent boarded up - and in some cases vandalised - retail property putting off those non-retail companies that might otherwise have revitalised such areas.

 

RTT member Mark Teale of CB Richard Ellis comments:  “Market concentration, as chain retailers migrate to the strongest trading locations has been steadily rendering more and more of traditional unit shops tertiary.  Each time the recessionary tide comes in, and stronger retailers flee to higher-productivity ground, more and more tertiary property ceases to be viable for non-food shopping purposes.  The trend, which has been apparent for more than 40 years, simply illustrates the chronic mismatch – in unit size, location and accessibility terms, between much of the traditional shop property and modern retailing requirements.  Where it is no longer viable for shopping purposes, change of use is clearly preferable to long term dereliction.”

 

-Ends-

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