Future for high st looks bleak, says DJD
BRITAIN’S most prominent retailers are likely to dramatically retrench their existing branch networks in favour of taking on fewer sites in prime centres, according to consultants Drivers Jonas Deloitte.
The practice held a Future of Retail seminar to coincide with this week’s British Council of Shopping Centres conference in Manchester at which it suggested the burgeoning online retail market is likely to dramatically reduce requirements for retail space.
Mark Underwood, a director of town planning at Drivers Jonas Deloitte, argued that there would be a “flight to quality” which is likely to have a negative impact on secondary towns.
He pointed out that new entrants into the UK market adopting a multi-channel strategy typically look for around 150 stores, whereas many existing high street stalwarts have more than 500, and in Arcadia Group’s case it has more than 3,000 units.
He argued that retailers looking for space will therefore be able to demand more flexible terms from landlords, including monthly rent payments or turnover-based rents.
“Local authorities will need to look at adapting retail space for other uses and rethink town centre strategies,” he said. “Some existing centres will contract and others will disappear altogether. There is a need to rethink the strategy for the high street.”
He said that in terms of shopping centre development, market confidence was “at an all time low” and that a number of schemes remain undeveloped, which can have a knock-on effect on confidence in a town centre if a large area of land remains undeveloped.
Simon Williams, a retail investment partner at the firm, said that the market for investment in the sector remained unclear. He said the impact of the eurozone crisis was likely to have a knock-on effect on banks, which are already proving to be unwilling lenders to the property development sector. Consumers are also paying down more personal debt, which means less cash is being spent on the high street.
Williams said that property values were likely to decline in the final quarter of 2011, reflecting the recent fall in the value of other assets such as equities and gilts.
He argued that the lack of debt meant fewer new developments were likely to start, and those that do are likely to be smaller than in recent years. Therefore, with little prime stock currently available he said that developers are beginning to look at secondary space where yields now look attractive.
“We see a number of deals being done where assets are sensibly priced, which will make money for investors in the long term. This could be a good time to pick up a bargain.”
