BHS will find it ‘challenging’ to offload its property leases to potential new occupiers, according to experts from the Local Data Company.

The beleaguered department store chain went into administration on Monday, after Retail Week revealed on Friday that the business was on the brink of collapse following seven consecutive years of losses. 

BHS’s administration put retail rivals on alert as the likes of Primark, Sports Direct and M&S reportedly ran the rule over its stores. But according to the Local Data Company’s quantitative figures on BHS’s portfolio – provided exclusively for Retail Week – the retailer could face an uphill battle to sell its leases.

A large percentage of BHS’s estate is located on high streets and shopping centres, both of which have suffered drops in footfall over the past year.

Retail parks have capitalised on changing shopper habits by revitalising their proposition and growing shopper traffic by offering more high street names, click-and- collect services and free parking. BHS has not responded to that trend and just 9% of its estate is situated on retail parks. 

Health Index rating

The Health Index calculates the quality and attractiveness of a location by comparing the site to the UK average for a variety of variables that include the area’s vacancy rate, long-term vacancy rate, dwell time (percentage of food and beverage outlets), number of anchor retailers and the provision of a cinema. These are all factors that impact the retail performance of an area.

NB: Nine stores outside Health Index coverage.

Crucially, half of BHS’s stores are located in areas with a Health Index rating of four or lower, well below the UK average score of six, making the properties less attractive to potential occupiers.

Less than a third of BHS’s stores have an above average rating of six or more.

BHS’s store estate in full

Retail Week has been passed a list of BHS stores (available to view at the bottom of this article), correct as of the end of November 2015. The department store chain has since agreed to exit a number of these locations, including its Oxford Street flagship, Carlisle and Sunderland.

But with other locations potentially on the market, a number of BHS’s retail rivals will be eyeing its remaining estate – and Local Data Company suggested that at least 12 familiar names will be in the frame.

List of potential occupiers for BHS stores

FasciaParent companyClassification
Marks & Spencer Marks And Spencer Group P.L.C Department stores
Matalan Matalan Ltd Department stores
Debenhams Debenhams PLC Department stores
House of Fraser Nanjing Xinjiekou Department Store Co. Ltd Department stores
Pep&Co Pepkor UK Retail Ltd Department stores
John Lewis John Lewis Partnership PLC Department stores
T J Hughes Lewis’s Home Retail Ltd Department stores
Fenwick Fenwick Ltd Department stores
Bentalls Fenwick Ltd Department stores
Primark Comparison Fashion shop
Habitat Home Retail Group PLC Furniture shop
Wilko Comparison Household stores

Reasoning:

• Large percentage of its existing estate is located in shopping centres or high streets

• Positive growth in the number of stores in the past 12 months (openings greater than closures)

• Similar floorspace requirements to the existing BHS stores, or able to open and add in concessionary retailers to fill up the excess space (e.g. IKEA, which considered the Oxford Street BHS store as a order and collection point)

Methodology

Data on which this report is based is collected by physically visiting town centres and out-of-town locations across the UK. 

650 major UK towns, 898 shopping centres and 1,234 retail parks are updated on a six- or 12-monthly cycle.

The Health Index was developed by Local Data Company and Morgan Stanley, looking at the attractiveness of a retail location. Anchor retailers refer to a list of specified retailers which make a location more attractive. The index has several variables which are used to give a rating of between one and nine, these are explained below:

VariablesExplanation
Population density Population size compared to the number of units
Vacancy rate Vacant units as a proportion to total units compared to UK average for retail type, eg retail parks GB vacancy is 9.8%, a rate of 11.0 at a park would carry a score of -3
Persistent vacancy Number of vacant units vacant for longer than one year
Proportion of charity shops % of units occupied by charity shops compared to the UK average (+2.3% equals to -2 points)
Presence of anchor retailers Point for every anchor retailer from a pre-selected list (eg Curry PC World, Next, M&S etc)
Movement of anchor retailers broken down into opening and closing Plus or minus a point for every anchor retailer which has arrived or closed in the past 24 months
Dwell time % of leisure units in the retail location compared to the GUK average (-4.1% difference equals -4 points)
Department stores Three points for every department store in the retail location
Cinema score Three points for every cinema in the retail location