High streets in smaller towns and cities are experiencing a retail renaissance as more and more value-led retailers target them for growth.

After “the quickest start up and roll out of new stores ever seen in Britain”, and with a second value brand launch due for next year, Pepkor UK is being as strategic as it is expansive.

The plan for fledgling clothing chain Pep & Co and for the as-yet unnamed general merchandise stores is the same: to focus on ‘secondary’ locations. In other words, the smaller towns and cities where its value offers are likely to go down well.

Adrian Mountford Pep and Co

Adrian Mountford Pep and Co

Pep&Co managing director Adrian Mountford sees “significant momentum on secondary high streets”

In some ways it is a risky strategy. Many retailers have been seeking to slimline their portfolios to focus on dominant regional shopping centres, big city high streets or cheaper out-of-town space, leaving high void rates in secondary locations and a ragbag of landlords and shops to take the space.

But retailers know very well that tough conditions can offer big rewards. Pepkor UK has seen an opportunity. Pep & Co managing director Adrian Mountford says that he sees “significant momentum on secondary high streets”, so should the rest of the industry take notice of? Are secondary high streets bouncing back?

Recession recovery

Mountford recognises how badly some places, including towns that his business is now targeting, were hit in the downturn. But he is also sure that now “they’re most definitely alive and kicking”.

”People love where they live. They want their high streets and town centres to do well. And if the offer is right in the store and outside it, they’re prepared to support them”.

Adrian Mountford, Pep & Co

He says: “It’s indisputable that people love where they live. They want their high streets and town centres to do well.

“And, as we now know better than most, if the offer is right in the store and outside it, they’re prepared to support them”.

Pepkor UK has said that Pep & Co could reach 900 stores, and has set itself a target of 10 of the new general merchandise stores by halfway through next year.

Rise of the discounter

Pep & Co is by no means to only brand spreading its wings in smaller town locations. Discounter Poundland has rounded off a heady growth period with the acquisition of rival 99p Stores’ 251 shops, and the rise of the discount grocers continues at pace.

Card Factory is among the retailers expanding in secondary locations

Card Factory

Card Factory is among the retailers expanding in secondary locations

But is the only way still up in such locations, or could a changing climate stifle growth?

In the years of recession and its aftermath, times weren’t just tough for retailers: landlords big and small, dealing with more and more empty stores, found themselves having to make more concessions over rents and provide more incentives to attract tenants.

That, observes Harper Dennis Hobbs head of retail consultancy Jonathan DeMello, created the conditions that chains such as Poundland and Card Factory were looking for.

“There’s more demand and vacancy rates aren’t as high as they were. It’s gradually moving back to being more of a landlord’s market”

Jonathan DeMello, Harper Dennis Hobbs

If conditions are improving in secondary locations, he says that might make things harder for retailers targeting them.

“I don’t think they will be able to do what Card Factory did,” he says. “Things are still tough in secondary locations but they are definitely up-and-coming.

“There’s more demand and vacancy rates aren’t as high as they were. It’s gradually moving back to being more of a landlord’s market.”

Increased demand

The figures for shop vacancy rates released by Local Data Company (LDC) in October, showing overall levels at their lowest since April 2010, is also indicative of rising demand even if some particular locations were still weak.

And in its latest quarterly Marketbeat update, real estate agency Cushman & Wakefield noted that for investors while the major cities still offered the prime picks, “other segments of the market remain very competitive, not least the discount sector, with food and clothing retailers competing aggressively for the best pitches in prime and well-located secondary markets”.

With changing shopper habits and the strength of the UK’s economic recovery still uncertain to some degree, whether or not retailers such as Pep&Co will be able to maintain the pace of expansion – and whether talk of a resurgence in secondary high streets is justified – remains to be seen.

But falling vacancy rates and increased investment look as if they may result in a win-win for secondary locations and the retailers that trade there.