A stroll down the high street can be a gloomy experience at the moment, with shutters down and ’To Let’ signs up. And the list of victims of the recession continues to grow. First Quench put 1,200 Threshers and Wine Rack outlets into administration in October. And baker Ainsleys of Leeds also called in the administrators, leaving further potential holes on the high street.
But all is not what it seems. If you are a high street baker without too much debt, the ’To Let’ sign may as well read ’Cut Price Sale’.
A new report from research company Colliers CRE, Shop Vacancies: Filling the Void, gives an optimistic prognosis on the high street, suggesting that its long-term decline may be arrested. Firstly, with supply of units outstripping demand, companies with expansion on the agenda hold all the cards. Rents are down. Colliers has found that average prime rents in Britain fell from £130 per square foot in June 2008 to £115 per square foot in June 2009. That is the biggest decline in the 22 years in which it has been monitoring retail rents and the first fall in 15 years. All regions of Britain saw a decline in rent, it says, with the north east and Yorkshire and the Humber worst-affected.
The report also says that rental values in Britain may not return to the highs of last year until 2015. The basis for that prognosis is that, after the last downturn in the early 1990s, it took seven years for rents to recover.
"The challenging times have provided the opportunity for retailers with a strong customer base and successful business plan to capitalise on their competitors’ downfall and expand their market share," said the report. "For acquisitive retailers, now is a good time to expand as the balance of power has shifted away from landlords when it comes to negotiations on leases and rents."
Colliers’ report points to a second factor that indicates now is the time to bag your bargain. As the economy went into recession, numerous shopping centre developments were shelved or delayed. Once the economy has recovered, there will be a shortage of new locations available.
This may all be a shot in the arm for the high street, with competition for good-quality retail stock becoming more intense and void units being taken over. Small and badly configured units in tertiary locations are likely to remain difficult to let, however.
The Greggs chain provides an example of how a well-funded business can cherry-pick the best sites with the economy in the doldrums. It is looking at buying 120 top First Quench shops and around 10 of Ainsleys’ 32 shops from their respective administrators. "When companies go into administration, we are quick to make contact. We’ve looked at many companies and have put extra people into our property team to do this," Greggs’ chief executive Ken McMeikan told British Baker.
Shopping centre surge
Colliers’ report also looks at the ongoing decline of the high street in favour of shopping centres. It says that, in the 1960s, high streets with vehicular access accounted for 88% of prime retail sites in Britain, followed by shopping centres at 8% and pedestrianised high streets at 4%. Now, that mix is 27% high streets with vehicular access, 24% pedestrianised high streets and 38% shopping centres.
And there is potential further good news for high street retailers suffering the resulting drain in footfall. This comes in the unlikely guise of changes to planning legislation. A new policy on planning (Planning Policy Statement 4) is scheduled to come into effect before Christmas, bringing together all government planning policies.
The rules replace the existing "need" and "impact" tests where developers have to show a demand for the proposed development. A revised impact test will look at the character and vibrancy of a town centre. Local planning authorities will be encouraged to "plan for a strong tenant mix so that the... retail offer meets the requirements of the local catchment area".
So, changes to planning legislation and a recession: who would have thought those two factors could lift the gloom on the high street and make it a Happy New Year?