Demand for shops might be coming back, but only in the very best locations.
Last Thursday was one of the big occasions in the retail property calendar, the annual CBRE party at the V&A, and the mood among the investors, developers and agents I spoke to as the champagne flowed was better than I could remember it being for a long while.
The flood of new space coming onto the market from administrations has reduced to a trickle, and there are interesting retail formats looking to take space from Best Buy and John Lewis at Home on retail parks to the Cortefiel brands (via Land Securities’ Brand Empire venture) on the high street. At the same time, many well-established retailers, particularly those backed by the fresh wave of private equity money, need more stores to meet their aggressive growth plans.
That’s really good news because while competition is always a challenge to established retailers, retail needs exciting new brands and new stores to drive footfall and keep retail destinations interesting for shoppers. No retailer benefits from being surrounded by empty shops.
There is a but though, and that is that with the exception of the hard discount formats like Poundland and 99p Stores, those non-food retailers which are expanding only want to go into the top tier of retail locations. That increased focus on top towns is being reflected in the investment market, and it was interesting to see the Crown Estate and Land Securities buying the Westgate site in Oxford from CSC in the belief that the city is undershopped and demand for a new scheme is likely to be high.
But go much below the top 30 town centres or retail parks and life if likely to remain tough. The web means retailers need many fewer stores to achieve national coverage, and no recovery in consumer confidence is likely to change that. What that means is we’re set for an increasingly polarised retail property market, where the strong locations become more dominant but the weak get weaker.
PS: Interesting to see that John Lewis at Home has agreed deals for its third and fourth stores in Tunbridge Wells and Swindon respectively. I can’t help but think that the freeze in shopping centre development which forced John Lewis into developing the At Home format might be the best thing that ever hapenned to it.
Both the towns announced today are far more suitable John Lewis locations than places like Preston and Crawley, where it had planned full-size department stores previously, and the minor inconvenience of having to pay rent should be more than outweighed by the efficiency of the retail park model and the fact that the towns and their surrounding areas are perfect John Lewis territory.