Prime rents have fallen in the South West by almost 7 per cent in the last 12 months while 70 per cent of towns and cities in the South West have a retail vacancy rate of between 10 and 20 per cent.
These are among the findings of this year’s Midsummer Retail Report from global real estate advisor Colliers International, which tracks trends in the UK’s retail property sector.
The research says that with ongoing political and economic uncertainty and a change in business rate policy looking unlikely in the short term, increasing vacancy rates and falling rents look set to continue to be a feature of the retail environment in 2020.
It says that caution among landlords and developers means there has been very little new retail development so far this year. 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 in the South West and Wales, said Bristol, Bath, Cheltenham and Exeter had all experienced rental decline in the last 12 months.
“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 says: “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.
The South West launch of the Midsummer Retail Report 2019 takes place on Tuesday, 2nd July at the Showcase Cinema de Lux, Glass House Lane, Bristol, at 12 for 12.30pm, with lunch and drinks to follow.