According to a report by Verdict, town centres across the UK lost out against online and out-of-town retailers, as shoppers spent£767 million less in town centres than in 2004.
The 0.6 per cent drop means that for the third consecutive year town centre sales, which Verdict defines as sales on the high street, in shopping centres and malls, bottomed out against all other retail markets.
The downturn was caused by rising inflation squeezing shoppers' disposable income - cost pressures that have hit retailers as well as consumers.
According to the report, town centre retailers are facing high costs that are pilling pressure on margins. Last year, town centre rents increased 3.6 per cent - the highest increase for six years.
Verdict, part of the datamonitor group, predicts that soon the balance will swing in retailers' favour as the town centre building boom leads to excess space that landlords will find it harder to fill.
The report argues that 'a surge in supply at a time of weak demand from retailers will put downward pressure on rents and force landlords to offer better incentives to attract retailers to their developments.'