‘Not all boats rise on the tide’ – analysis of GB’s H1 2014 vacancy rates

This morning, at Freshfields Bruckhaus Deringer’s offices in London, The Local Data Company’s (LDC) latest report on vacancy rates entitled ‘Not All Boats Rise On The Tide’ was presented by me at LDC’s 10th Retail Summit. It analyses over 3,000 town centres, shopping centres and retail parks. The report analyses retail and leisure vacancy rates in the first half of 2014 to deliver the most comprehensive insight on the health of Britain’s towns, retail parks and shopping centres.

The first half of 2014 has shown a positive improvement in vacancy rates across the country both by geography and location type. What is very clear, however, is that this positive trend is not universal and hides significant variances. The fact that the North West’s vacancy rate is more than double that of London is one clear example of polarisation.

LDC’s new Health Index is a more comprehensive way to look at health of our towns, shopping centres and retail parks as it looks at vacancy data as well as the quality and breadth of occupation. Whilst overall it shows more high streets improving it still highlights that there are nearly 200 that are declining with one in five medium high streets in decline.

The persistency of vacancy is increasingly significant as recent analysis by LDC shows that over 100 location’s vacant units have been vacant for more than three years and this equates to over 1,600 units. What is to be done with these units and the other 50,000 that have no trading business?

What is encouraging in this report is that High Streets are fighting back as are shopping centres, but and it is a big but, consumer confidence remains fragile and the out of town and mega mall offer continues to strengthen as they become destinations and often destinations of choice. What is unique and the greatest trump card that High Streets have is that, in theory, they are at the heart of communities and as such have an in-situ audience but one that must not be taken for granted and must be energised, nurtured and entertained

Here are some of the facts. Shop (retail) vacancy rates have shown marked improvement towards the end of the year from their peak of 14.6% in February 2012 to reaching below 13.5% (13.4% in May 2014) for the first time since June 2010.

The North/South divide evidenced in previous reports is still clear with Southern centres seeing a vacancy rates improve by around 9% whilst centres in the North and Midlands have seen just a 3% improvement. The North West continues to be the worst region for all (retail & leisure) vacancy at 16.9% but has shown improvement of 0.4% whilst the North East is the only region to have shown a decline in its fortunes with an increase in vacancy rate by 0.4% to 16.4%. Of the top 10 worst town centres for vacant retail and leisure premises, all of whom are above 23%, 6 are in the North East or North West. Conversely, of the top 10 best performing town centres with the least vacant units, 7 are in Greater London and the South East.

Small towns (<200 units) are in the healthiest state at 8.9%, which is a 0.1% improvement on the end of 2013. Medium towns (200-400 units) have also shown a decrease in their vacancy average by 0.2% to 11.7% and large towns/cities continue to have the highest overall ‘town’ vacancy rate at 12.9% but have also shown the greatest improvement at -0.6%. Overall Retail Parks lead the pack at 8.9%, which is an improvement of 1.5% on the same period last year and Shopping Centres continue to have the highest vacancy rate average at 15.3% which is an improvement of -0.8% on 2013.

Regional analysis shows improvement in all regions with the exception of the North East ((+0.4%). In order of improvement they are – South West (-1.7%), South East (-1.3%) East Midlands (-0.8%), Yorkshire & The Humber (-0.8%) London (-0.5%), East of England (+0.5%) West Midlands (-0.4%) and the North West (+0.4%). The North West’s vacancy rate of 16.9% is still more than double that of London which is 7.8%.

LDC’s new Health Index which analyses 10 qualitative and quantitative attributes of vacancy and occupancy shows that of the 3,000 locations analysed, in and out of town, there is an overall balance of 20% between improving and weakening centres with 60% being stable. When applied to High Streets then the balance is more positive with 24.4% (277 High Streets) improving and 17.4% (197 High Streets) weakening. Analysis by size of High Street shows 31.8% of small High Streets improving compared to only 4.5% of large High Streets. Medium High Streets are at most risk with 20.6% weakening and only 14.3% improving.

Detailed analysis by town, shopping centre or retail park is available to LDC clients as is the full H1 2014 vacancy report. Get in touch for more information.

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