Shop vacancy rates stabilise in 2011 but the gap between the best and worst performing towns widens and over 14% of shops still remain vacant

8 Sep 2011

Policy area: Town centre & Retail

The Local Data Company’s latest Shop Vacancy report, titled ‘The good, the bad and the (very) ugly’ reviews the shop vacancy figures of over 1,000 retail centres.

Whilst the good news is that the three fold increase in vacancy rates since 2007 has stopped, the fact remains that in the extreme centres one in three shops stands vacant yet others remain at pre recession levels. The short and medium view of this report is that this is unlikely to improve significantly due to the current economic climate, the rise of alternative sales channels and the number of shops the country has.

The picture across Great Britain

Town centre vacancy rates in Great Britain have stabilized at 14.5% during the first half of 2011.

Regional variations

The North South divide apparent at a centre level is reinforced when looking at a regional analysis. Figure 2 shows the average shop vacancy rates region by region.

All the southern regions see an average vacancy at or below 11% while the Midlands and North range from just under 13% in the East Midlands to 16% in the North West.

The top ten worst-performing large centres are in the West Midlands and the North while seven out of the top ten best large centres are in the South.

Amongst the medium sized centres the situation is the same with the top ten centres all in London and the South while eight out of the ten worst-performing centres are in the North. The only exceptions are Dartford with a vacancy rate of 26.3% and Newport in South Wales with 26%. The best performing medium-sized centres run from Sevenoaks with a vacancy rate below 5% to Falmouth at 6.6%

As far as the smaller centres covered are concerned, the best performers are again mainly in London and the South East. At first glance the top ten worst performing small centres looks different with Margate (36% vacancy) and Wandsworth (31%) at the top of the table. However further down the list the picture becomes more familiar with the likes of Runcorn, Corby and Bootle all seeing poor vacancy rates.

High Street v Shopping centre and Prime v Secondary

There is increasing evidence that the retailer pain is not spread evenly between the High Street and the Shopping Centre. The latest results from several of the big, retail-owning property companies show their revenues have been surviving any tenant difficulties with ease. Solid rental growth, footfall and occupancy levels demonstrate that prime properties are taking market share away from other locations.

Retailers are looking to close older and poorer performing outlets where possible, and relocate into new stores in the bigger and better centres, streets and warehouses to bolster diminishing profits. The more they come under pressure, the greater will be the need to rationalise portfolios of stores into the best-performing locations, which should continue to benefit the larger companies with prime portfolios at the expense of high streets and secondary centres elsewhere.

Performance by size of centre

The large centres (those with 400+ shops), see an average vacancy rate of nearly 17% at the half year, but this is in a range that runs between 6.4% in Shepherds Bush to 27.7% in Stockport.

Medium centres (with between 200 and 399 shops) fare slightly better with an average of just over 14% and small centres (with between 50 and 199 shops) better still at just over 12%.

Small centres see higher levels of volatility than do medium and large centres, mainly because there are fewer shops in each centre.

The most significant difference however is geography. Centres in the South – London, the South East, the South West and Eastern regions – see much lower vacancy rates on average than to those in the Midlands and the North.

Three year trend

Figure 3 shows analysis of 75 towns from the first half of 2008 when the first real impacts on the High Street were seen with the demise of Woolworths in January 2008. It shows how significant this rise in shop vacancy has been but also how varied this change has been with some centres actually improving but with a majority not!

A mere 7% showed that they had ‘weathered the storm’ and included Guildford, Camden, Bath, Cambridge and Cardiff. 29% showed an increase of less than a 10% rise in shop vacancy. Towns in this league include Chester, Edinburgh, Bromley, Perth, York, Cheltenham and Harrogate. The remaining 64% showed increases, in the worst cases, of over 20% and include Stockton-on-Tees, Bradford, Stockport, Kingston-upon-Hull, Walsall and Wolverhampton – all north of the ‘Watford Gap’!

Summary

  • Diversity of performance is widening between centres and this is also seen in the Experian Footfall regional figures
  • North and Midland centres are worst affected
  • Current trends in online sales, supermarket expansion and retailer network drawdowns will continue to impact future performance
  • Positive take up of shops has been seen in the Convenience food sector, discount stores, charity shops, bookmakers and pawnbrokers.
  • Poor secondary centres are most at risk from becoming unsustainable as retail destinations
  • The sector still has major changes ahead as it adjusts to these changes and with regards to rental negative growth in certain areas this is now being seen in the IPD regional indices.

Matthew Hopkinson, director at the Local Data Company commented:

“This report shows how fragile the British High Street is in parts of the country. The pressures it faces are increasing and therefore one needs to be realistic in one’s approach to each and everyone of these towns if they are all to have a future. The stark reality is that Great Britain has too many shops in the wrong locations and of the wrong size. The diversity of shop vacancy rates is clear evidence that a local approach is required that ties in with consumer needs and the realities of modern retailing. The market still has significant corrections ahead and the impact of these will vary significantly according to location.”

Liz Peace, Chief Executive of the British Property Federation, said:

“Many of high streets and town centres are in a critical, but stable condition. Their recovery is not just going to happen, but will need nursing. It will require investment from our sector, and the confidence that goes with a local authority that has leadership, a clear vision, and a willingness to plan and manage their retail environment. We must also accept that some secondary retail units are no longer viable and plan their transition to other uses. Simply hurting successful retailing to level the playing field is not the solution. We must find new ways to get people on to our high streets and in our local shops.”

ENDS