More than 9% of shop space now lies empty and there are 2,485 fewer shops than there were three years ago.
To those stark BRC figures more closures are likely to be added as CVAs loom and shopping habits continue to shift, raising questions about the future viability of traditional retail location strategies.
As Landsec boss Robert Noel put it this week: “As for retail real estate, the gap between the best space and the rest keeps growing.”
The problem, for retail and society, is that “the rest” amounts to vast square footage and will dictate the health or otherwise of companies and communities.
“Surely it is time for a ‘new deal’ between owners and occupiers of retail property that reflects contemporary reality”
Such general fears over the future of retail property were evident in shareholder reaction to the proposed tie-up between two of Landsec’s rivals, Hammerson and Intu, as investors put a kibosh on the deal.
Surely it is time for a ‘new deal’ between owners and occupiers of retail property that reflects contemporary reality and provides new commercial models, such as different lease structures.
There is some evidence of change. Local authorities are increasingly buying shopping centres. Canterbury City Council, for instance, bought the 50% of Whitefriars that it did not own for £75m earlier this year.
Similarly, Wigan Council bought The Galleries for an undisclosed sum in a bid to regenerate the mall “after years of stagnation and decline”.
Understandable as such interventions may be, their success is yet to be proven. Some observers rightly question whether local authorities have the expertise and resources to commercially manage shopping centres effectively.
Partnerships and reform
Whoever owns shopping and town centres, surely the biggest priority should be to more effectively bridge the gulf between the online and offline worlds.
Amazon has set the bar high with its cashierless Go convenience format, but there are many points in between – the etail Goliath’s purchase of Whole Foods demonstrated that. And in China, companies such as Alibaba are pioneering new digitally enabled and engaging store models.
“It is likely to be technological innovation that will play a crucial role in ensuring the future health of retail locations”
Here, Intu has adopted a front-foot approach through initiatives such as the Accelerate programme with tech start-ups, which made its debut last year.
Others should follow its example because it is likely to be technological innovation that will play a crucial role in ensuring the future health of retail locations.
As with Intu or John Lewis’ JLab scheme, partnerships are most likely to deliver game-changing ways of doing business. Such expertise is not part of the traditional retail skillset that still predominates at many businesses.
All of that must be accompanied, however, by a renewed push for business rates reform.
That cost burden, unfairly borne by retailers with stores, is not just jeopardising the financial health of shops, but reducing the level of investment that retailers might plough into the clicks that could enhance the appeal of their bricks.
Otherwise, will it be left up to Amazon, which carries a comparatively light business rates burden and has a bulging investment war-chest, to decide the future of shopping and town centres?
- Do you think there needs to be a new deal between retailers and property owners? What options do you see for change? What needs to happen? Have you seen innovative approaches to the problem in other countries? Let us know.