The latest Bidwells high street retail update underscores how the ‘retail reboot’ currently underway is changing the function and make-up of UK high streets.
High street rents across Bidwells’ region slipped during the first half of 2017 and stabilised at this level throughout the rest of the year, delivering an overall fall of 4.8% on average. This was driven by a combination of factors. The opening of the Westgate Shopping Centre in Oxford inevitably spurred an increase in the availability of retail units in the city, now standing at 15.2%. The other towns across the Bidwells region have also seen rates creep up a little in recent years, although generally vacancy rates have remained stable for the last two. Cambridge has seen the rate slip back to the lowest level since 2015.
Shifting under the surface
While new retail openings, such as the Westgate, have an inevitable impact on vacancy rates, the challenging economic conditions are also playing a part. Recent retailer failures, such as New Look, and announcements on poor trading results from the likes of Next are taking their toll on the cookie-cutter make-up of high streets. The CBI’s latest monthly Distribution Trades Survey reiterate the tone of the spending backdrop, reporting a broadly based fall in retail sales in the year to March 2018. Elevated inflation, stagnant real wage growth and Brexit uncertainty are an unfortunate combination for retailers. However, under the surface there is a wider change occurring on the high street.
Third year of above trend take up
Despite the slip in the average prime rent in 2017, the Bidwells’ region saw above trend levels of take-up during the year, a consistent theme of the last three years, and still there remains a backlog of demand. Overall across the region’s high streets requirements stand at 1.4m sq ft. Robust demand in the face of weak rental growth reflects the ‘retail reboot’ occurring on high streets generally.
Structural change in the retail centre is taking its toll on household retail names, but in doing so driving a evolution in high street make-up and function. The Local Data Company (LDC) reports (2018) significant net closures of comparison goods retailers across the UK, but with a corresponding increase in leisure and experience occupiers. Significantly LDC finds the quality of leisure offer on a high street is determining footfall and spending.
Changing consumer models
The rebasing of rents on the high street, albeit relatively mute across the Bidwells’ region, but quite marked in many locations across the UK, provides the opportunity for leisure occupiers and also independent retailers to move onto the high street and backfill the losses from recent big name failures. Historic centres such as Oxford and Cambridge have the added advantage of an inherent leisure offer in situ.
The retail reboot is undoubtedly challenging for retailers struggling to establish a model that works for changing consumer behaviour and finances. It is also clearly problematic for some investors in high streets, where rents have fallen or are expected to do so, to adjust to the experience role of town centres. Institutional investors have in fact been disinvesting from many of the UK’s high streets for the last decade, with town centres increasingly in the hands of private investors, many of which are local and have a vested interest in their long-term viability. In prime towns and cities such as those across the Bidwells region, investors with a long-term vision also dominate, whether in the form of College ownership or institutional holdings with a wider regeneration vision.
Long term vision to support reboot
This long-term holistic vision is as important on the high street as it is for shopping centres. Taking a view on retails rents in order to deliver diversity of offer, or the delivery of new homes to boost 24 hour vitality exemplify the challenge. This underlines the important role of local authorities and town centre management schemes to facilitate the vision, particularly in the absence of a critical mass of single ownership.
The ‘retail reboot’ will present some challenging conditions for many of the UK’s town centres over the coming years, with protracted rental falls likely across many locations. But this latest Bidwells data underscores the opportunity available to many towns, whether as local centres or a major leisure destination; experience will underpin occupier demand and keep towns alive and vibrant.
Take up across Bidwells’ markets hits a peak level of 613,000 sq ft due to opening of the Westgate Centre, Oxford
Retailer demand remains buoyant at 1.4m sq ft despite record levels of take up
Take up across Bidwells’ markets over past two years
Availability rises across Bidwells’ markets as retailers move to prime units
Prime rents forecast to bounce back after further adjustment in 2018
Average availability rate across Bidwells locations
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