On Tuesday 21st March, LDC held its 15th Retail and Leisure Summit where I presented what the trends of 2016 were, alongside looking back to 2012, which was when the peak in vacancy rates and closures occurred. A quick summary of those trends is below and more detail can be found in the FULL report if you are an LDC client or in the SUMMARY which can be downloaded for free HERE.
How many stores are opening and closing?
For the last five years, the volume of retail and leisure units that open and close has remained virtually the same which is c.100,000 a year. Central London has c.25,000 units so that is four Londons a year! So, the volume of change is significant as in some places there are very few openings or closures and in other places, this can be as high as one in three stores a year. What is a key driver, being the balance between the openings and closures, is the net change. In 2016, there was a net loss of 1,650 occupied stores up and down the country. This might seem a lot as it is the equivalent of Leeds city centre, but across the 3,000 retail destinations that LDC tracks it is not significant. It is approximately a net reduction in the country’s stock of stores of 0.3%. If you look at the numbers since 2012 then the net loss is 4,124 – see figure 1 below.
Figure 1. GB openings and closures 2012-2016 (Source: LDC)
So where are all these stores?
51.4% of all retail and leisure units across GB are still in town centre high streets. 6.9% are in shopping centres and 2.6% are on retail parks but of course in floorspace terms then retail parks will be significantly more.
How are our retail places changing?
Comparison goods (bulky goods, clothing, footwear, books etc) have continued to decline and in 2016 2,171 stores were lost (net closures). To achieve this net loss there were 32,800 comparison goods stores that either opened or closed in 2016.
Convenience retail (food, newsagents, tobacco/e-cigs, supermarkets, convenience stores etc) closed more stores than were opened with a net loss of 409 units. The last time this sector saw a net loss in stores was back in 2012 (the annus horribilus) so this must be a sure sign of a saturated market?
Service retail is one of extremes with banks closing significant numbers of branches (-845) whilst health and beauty outlets that service the needs of men and women continue to grow exponentially (+917 for barbers and beauty salons alone). The combined result saw a marginal growth in units at 114 from a net loss of 258 units in 2015.
Leisure (Food, beverage, entertainment and accommodation) continued its growth of the last five years with a net increase of outlets of +816. Whilst pubs and betting shops have been shutting up shop, restaurants and takeaway food outlets have been growing at a rapid rate and one that I do not believe is sustainable for 2017 even with the additional growth of food delivery such as Deliveroo and others. One to watch as we have already seen closures within the sector notably Ed’s Diner, Jamie’s Italian and Restaurant Group outlets. Will a curb on consumer spend cause the bubble to burst or will competition kill any profitability for the marginal operators?
Figure 2. GB openings and closures by classification 2012-2016 (Source: LDC)
What about all the independents? Are they surviving these headwinds?
Contrary to popular belief independents (brands with <5 stores) are alive and well, indeed thriving relative to their chain neighbours. In 2016, there were 831 more independent stores than there were in 2015, whereas the chains (brands with 5+ stores) lost 2,481 units. None, however, were in the Leisure sector! Comparison goods retail was the only sector in common where independents and chains saw a net loss in stores – 2,171 in total.
Growth between chains varies enormously as seen by the fact that the top 75 fasciae in the country opened 6,838 stores between them in 2016. Examples of expanding fascia include Poundworld, Leon, TK Maxx, Prezzo, Pandora, Card Factory, Aldi, H&M, Nandos and Pure Gym – a real mix of businesses.
Are there more vacant shops now than in 2015?
In short, the answer is no – there are less vacant shops now than at any time before 2012. The shop vacancy rate that LDC has tracked since 2008 is now 2.4% below its 2012 peak of 14.6%. In 2016, it fell by 0.5% and latest data from LDC shows a continued improvement for the first two months of 2017. This is not necessarily as more shops are occupying these previously empty shops as 1,650 shops were lost in 2016, but a combination of new stock being built (and occupied) as well as an acceleration in redevelopments and repurposing of empty units.
Persistent vacancy is the KEY statistic in my view as this indicates how healthy a market is as if a shop stands empty year after year then clearly there is no need for it and something needs to be done. Of course, if you live in the south of England then a unit is worth more as a house, but if you live in the north where property prices remain in negative equity for many, then repurposing a shop to residential has no value whatsoever. And of course, a significant number of the empty retail and leisure premises reside north of the Watford Gap.
3.5% of the total stock of shops, pubs, clubs etc. across GB have been vacant for more than three years – that is over 15,000 shops which is ten Nottinghams never to be reoccupied!!
Looking at top, the real basket cases (units vacant for more than 5 years) then the West Midlands, North West and North East all have 3%+ of their total shops which have been empty for more than 5 years. See below:
So, which are the best and worst towns for empty shops?
I do not want to be reading the football scores of vacancies listing town by town, city by city as LDC has many reports at the click of a mouse that will do this. Polarisation is the watch word here as the range of vacancy rates is as wide as 0% to over 25% and even greater if you look at the worst shopping centres. Your average city in the UK has a vacancy rate of 10-12% which is on the national average. Some, such as York, Bath and Edinburgh have rates below 10% whilst others such as Nottingham and Leicester and Derby (for an East Midlands perspective) are 15%-16%. Outliers are Bolton, Burlsem, Newport, Stockport Wigan and Dewsbury which are all above 24%.