Why the latest shop vacancy rates are a cause for celebration but also concern

Britain’s shop vacancy decreased to 12.5% in January. This is the lowest its been since it was 12.4% in December 2009. In January 2016, the number of vacant shops dropped by -171 and the number of shops increased by +81. These were the main drivers in the reduction in the vacancy rate. The peak in vacancy rates was 14.6% in 2012.

GB Shop vacancy rate 2008-2016

GB Shop vacancy rate 2008-2016 (Source LDC)

These are encouraging numbers for the very reason that January has seen a net increase in the occupation of shops rather than the removal of empty shops from the overall stock. The GB national vacancy rate is also now at a level not seen since December 2009. What is also encouraging is that high vacancy towns such as Newport, Doncaster, Bradford and Blackburn have seen improvements. Conversely small centres near Liverpool including Old Swan, Everton, Gateacre and Hoole have seen vacancy rates increase.

The fact that interest rates do not look like increasing in 2016, oil prices are set to remain low for the very long term and that employment and incomes are rising albeit slowly means good news for retailers as consumers will continue to spend, be it online, in-store or both. The ability for retailers to do this profitably is the one big question as costs and competition increase. Casualties of this have been seen in the recent administration of Brantano Footwear and the significant store closures of Blue Inc.

The ability for retailers to do this profitably is the one big question as costs and competition increase

The area of concern is that the number of units that have been vacant for more than three years has increased by 26% in the last year to over 12,000 which equates to six Manchester’s lying empty! Nearly 5% of Britain’s town and city centre shops have remained empty for more than three years. So whilst we have seen some positive signs at the start of 2016 for the ‘high street’, we cannot shy away from the vast numbers of empty shops that are never likely to be reoccupied again. 

Vacancy rates by occupation type

Analysis of vacancy rates by occupation type shows that Shop vacancy in January was 12.5% (-0.2%), Leisure vacancy was 8.15% (0.00%), and All (Retail & Leisure) vacancy rate was 11.4%( 0.0%).

Vacancy rates by occupation type in January 2016

Vacancy rates by occupation type in January 2016 (Source LDC)

Vacancy rates by location type

The shopping centre vacancy rate dropped by -0.4% in January 2016, when compared to the previous month. Wales (-1.0%) and Greater London (-0.8%) saw the biggest drops in vacancy rate across the GB nations and regions. The West Midlands was the only English region to see a fall in its vacancy rate of -0.4%. Compared to January 2015, Wales has seen the highest increase in vacancy rate over the 12 month period. Wales’s shopping centre vacancy rate increased by +2.2% in the 12 months to January 2016, the only GB nation or English region to see an increase over the same period.

Retail park vacancy rates improved across the majority of the GB nations and English regions. The North East and Scotland saw a +0.2% and +0.1% increase in vacancy respectively in the one month to January 2016. The region with the best performing retail parks was Yorkshire and the Humber, which saw a -0.9% drop in January when compared to December.

The town centre vacancy rate had a slight drop of -0.1% in January 2016, when compared to the previous month. They were mixed results across the GB nations and English regions, with the vacancy rate dropping in seven regions/nations (East Midlands, London, North East, North West, South East, Wales and West Midlands), staying the same in three regions (Yorkshire and the Humber, South West and East of England) and increasing in one (Scotland). Compared to 12 months ago, town centres have seen a -0.4% drop in their vacancy rate.

All vacancy rates by location type in January 2016

All vacancy rates by location type in January 2016 (Source LDC)

Persistent vacancy

Persistent vacancy calculates the number of units vacant for longer than three years. A unit that has remained vacant for over the three years and thus is unlikely to be reoccupied. It is therefore a key barometer of retail health in a location.

We cannot shy away from the vast numbers of empty shops that are never likely to be reoccupied again.

The North East was the only region to see a change in its persistent vacancy rate in the last month, with a -0.1% drop when compared to December 2015. The region with the highest percentage of persistently vacant units is the North East. The North of England, Scotland and Wales, all have persistent vacancy rates above the GB average (4.5%).

The number of long term (vacant for 3+ years) shops has increased from 9,796 at the end of 2014 to 12,350 in January 2016 (+26%).

There is a clear north/south divide in terms of persistent vacancy.

Persistent vacancy rates by GB nations and English regions in January 2016

Persistent vacancy rates by GB nations and English regions in January 2016 (Source LDC)

The image below clearly shows the impact of long term vacant units on a town and in this case it is Dewsbury (source LDC’s online insight tool).

Screen Shot 2016-02-11 at 14.38.17

LDC’s 13th Retail Summit where detailed analysis and discussion on the UK’s retail places will take place on 4th March (0830-1030) at the offices of Berwin Leighton Peisner in London. If you would like to come then please go to http://www.localdatacompany.com/events

Knowledge at a micro level as LDC has is key to understanding the issues at play and performance over time. If change is to happen then WHAT, WHERE and HOW? Where there is a will there is a way but it must be based on sound knowledge derived from credible data and insight over time and not a mere snapshot. Five years trend is the minimum in my view.

Your views on this important part of the economy and our communities are most welcome.

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