Written by Michael Blake, Director
Shopping - the great British pastime. The retail sector has been making the news regularly this year. The failure of well-established brands such as Toys-R-Us and Maplin, store closures, weak consumer spending and growing online competition is changing the face of retailing.
We will all have seen some traditional high streets which have declined in recent years, with vacant shops appearing and a general loss of retail amenity with the encroachment of charity shops, coffee houses and temporary stores.
Retailing is changing, and commercial property investors and retailers will need to change as well. There is a generally accepted view there is simply an over-provision of retail floor space and it is perhaps the large multiple retailers, who have amassed enormous property portfolios over many years, who face the greatest challenge. House of Fraser, recently bought out of administration by Mike Ashley, is a prime example.
We have also seen a move towards shorter shop leases, with a five-year term or a ten-year term with a tenant’s break at the end of the fifth year becoming the industry norm. There has traditionally been a confrontational relationship between property owners and shop tenants. Perhaps in the future landlords will need to adopt a more co-operative stance in their dealings with tenants.
Some traditional town centres need to widen their appeal - the introduction of non-retail uses in town centres is a vital component for their rejuvenation. Bill Grimsey, former CEO of Iceland and DIY chain Focus, who published a report on the state of retail in the UK in 2013, has produced a second report this year - five years on. Grimsey argues that towns need to stop trying to compete with out of town retail parks with free parking and says “they (towns) must create their own reason for communities to gather there – being interesting and engaging and altogether a compelling and great experience”.
Grimsey advocates bricks and mortar retailing does not need to be the anchor for a thriving high street. He would like town centres to be re-fashioned into community hubs that include housing, health & leisure, entertainment, education, arts and business/office space, with some shops. In particular, he would like to see libraries and public spaces at the heart of each community.
Some high streets have ridden the storm and continue to offer a vibrant shopping environment. But even traditionally strong towns such as Northallerton in North Yorkshire, have seen relatively static rents in recent years - some owners of secondary shops outside the prime core have struggled to re-let vacant units. Other towns have adapted, such as Morpeth in Northumberland, where the Sanderson Arcade and former Morrison’s store redevelopments have significantly enhanced the town’s appeal.
Investors in retail property must be vigilant. They must continually monitor conditions on the ground and take a flexible approach on letting space. At times, consideration may need to be given to schemes of refurbishment, or changes of use to ensure demand is satisfied and the property continues to provide consistent rental income.
If you are considering investing in retail property or seeking advice on the management or re-letting of existing properties, please contact Michael Blake at our Newcastle office on 0191 261 0300 or email firstname.lastname@example.org
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