On Wednesday 4th February at the offices of Freshfields Bruckhaus Deringer in London we held our 11th Retail Summit on vacancy rates. The aim of the event is very much to inform, discuss and debate the causes and effects of what we see happening in our high streets, shopping centres and retail parks up and down the country. In essence it is to encourage ‘thought leadership’ on what I believe is a very important economic barometer and one that is understood by few but debated by many.
To ensure we do this we always have a panel of experts to discuss the reports findings, which I present at the event. It is important to have an experienced and informed chair, which for this event it has always been Claer Barrett of the Financial Times. We then look to have academic, industry, media and political input and we have been fortunate to have some excellent panelists who make the event what it is. This week we were fortunate to have Bill Wiggin MP, Professor Sotiris Tsolacos (Henley Business School), Emma Simpson (BBC) and Polly Troughton (Land Securities). I also endeavour to get a good balance of men and woman as this is something that other events are often criticised for not having!
This is a brief summary of the points the panel made. I will not extend the words by attributing each one but want this to give you a feel of what the experts’ views were.
- Speed of change. Is what we see in the regional indifferences a result of the speed of change being different as a result of varying economic activity? The current government has big plans for the North West by spending £18bn on the NW (second highest vacancy rate) economy by 2030 with 25,000 more houses and 100,000 more jobs. Yesterday, this economic growth plan and impact was alluded to by Simon Jack on BBC Radio 4’s Today programme as he did his live business update from Manchester airport. With more jobs and economic activity comes more disposable income! Only time will tell.
- Localisation. The power of the data is that it shows the very different performance at a town level and that within regions there are very diverse issues – micro economies. Every town is different and you cannot over generalise, but what we do know is that we have population growth, consumer spending has held up and that the Asda income tracker showed its highest growth in December. Positive news, which the low oil price is adding to.
- Fallout came at Christmas for the delivery companies with Yodel’s issues and the administration of Citylink. This is a wider reflection of how competitive retailing has become. Shop prices have fallen for the 21st month in a row. Good is not good enough these days and the challenge retailers have is maintaining profitability and hence why few, better stores will help increase profitability.
- Polarisation is the big point here. It is being driven by retailers reacting to online trends, and having fewer, bigger stores, which will result in more vacant units. Dominant retailers have got stronger and the weaker have got poorer which impacts their ability to compete and adapt. Within these vacancy blackspots is it the shopping centres that have killed the high street off? An example is Margate and Westward Cross Shopping Park is a classic out of town example.
- Consumer demand has driven the out-of-town parks growth as it delivers range and value along with free parking and congestion free access. For retailers these locations deliver flexibility, space, right unit sizes and lower rents (=more profitability!). Steel frame buildings are much easier and cheaper to change than Victorian brick buildings! Whilst there is demand developers will continue to build (development stats I showed are testament to this.)
- Business rates (never does an event pass without this coming up!) are still the big issue and 2017 will show what change if any will take place as governments like to give certainty and slow change to business. The system works in such a way that even if your business rates are either 25% too high or too low you will not see the impact at that level which is something one can debate into the night! A new adult ball pit shop in Shepherd’s Bush was cited as an example of alternative use to this vacant shop issue – let me know if you have been. What alternative uses would you have on your high street?
- Supermarkets. It was a big moment when Tesco announced the closure of 43 stores and abandoned 49 developments with Morrisons also announcing closures. Big impact as Dartford has seen having battled with Tesco for 10 years, 10 wasted years as it now turns out and at what cost both financially and socially? There are many other Dartfords out there. The consumers’ view of supermarkets depends on who you are – a mum and three kids loves the convenience and parking whilst retirees prefer smaller more community focussed shops. At the end of the day shopping and our views comes down to how much time we have available. With an ageing population this should favour the smaller shops. Many out of town large food store developments have had serious impact on towns. Leominster was cited as an example but there are many more as you will know only too well.
- The future will be very interesting and very different to what we have known before. Fail to prepare, prepare to fail! Big chains are now looking at smaller concept stores to support click and collect or enhance the digital offer (e.g Argos, Decathalon, John Lewis). Delivery to the customer either in-store or to their home is critical and hence why Amazon may buy the US Postal Service. In my view Royal Mail has really failed to optimise its tried and tested network let alone how many of us know (and like) our postie. The future is very uncertain for many retailers as there is a great deal of over optimism and when you look at many retailers they are having to service significant debt levels – further change in consumer spend and a rise in interest rates could be the last straw.
Shops, be they in or out of town, have a role to fulfil. It is no longer the sole role and is often secondary to entertainment and eating as we know what we want and where we can get it. The fact that 70% of people ate out in the last two weeks shows that consumers want places to go – our job as observers, occupiers, landlords and local authorities is to make sure that we give them what they want as if not they will go elsewhere. Britain is still a ‘nation of shopkeepers ‘and we should celebrate this 200 years on from the Battle of Waterloo.
How would you plan for the changes we see to deliver the healthy ‘high street’ of the 21st century?