These are among the findings of Colliers’ Midsummer Retail Report which notes that ongoing political and economic uncertainty, together with no expected near-term change in business rate policy, will likely lead to unchecked rising vacancy rates and falling rents within the South West retail environment into 2020.
Caution among landlords and developers has led to very little new retail development so far this year in the region. The major regional project ongoing in the sector is the 100,000 sq ft leisure extension to Drake Circus in Plymouth, which is set to open this autumn.
Hal Clarke, Associate Director in the Retail Agency team at Colliers International explains:
“Last year, we reported a -1.4 per cent fall in rents throughout the South West and this decline has accelerated in 2019 with a 6.9 per cent drop being recorded in the region, only slightly below the national average of 7.01 per cent,” he said. Due to the spate of CVAs and administrations, occupancy levels have been placed under severe pressure and the simple supply versus demand balance has resulted in rents falling.
“The retail warehousing market depicts a slightly more mixed picture. The top retail parks in the region are still popular with occupiers and have even recorded incremental rental growth in some instances this year. However, at the other end of the spectrum, the gap is widening and parks that have struggled to maintain occupancy levels historically have poor prospects and may need to be repurposed sooner rather than later.”
Colliers International’s Midsummer Retail Report 2019 also highlights:
• the end of the “Golden Age” of online retailing – retailers are looking to reshape unsustainable business models amid concern about the environmental impact of delivering purchases made on the web – therefore a growing number of retailers are increasing their reliance on physical shops;
• “shopping with a conscience” – landlords are increasingly exploring how to integrate’
“shopping with a cause” into their environments which resonates with trends in society;
• the fact that many shops will never be shops again – Colliers International is involved in repurposing parts of shopping centres and large stores such as Debenhams and BHS for new uses, primarily residential, hotels and leisure;
• Prime Zone A retail rents have fallen 5.26 per cent in central London in the last 12 months, the smallest drop of any region, compared to 12.85 per cent in Wales, the largest.
Hal Clarke adds:
“Retail repurposing has begun in many towns and cities throughout the region as landlords come to terms with the hard truth that for some assets, there is no viable retail future.
“However, a buoyant gym market and the potential for further residential, student and hotel accommodation in many large towns and cities mean that this should be viewed as much as an opportunity as a problem. Looking ahead to 2020, it is essential that landlords are open minded to alternative uses if they are to extract value from their assets.”