High street recovery ‘hangs in the balance’

RECOVERY on the high street “hangs in the balance” as a huge number of town centre leases approach expiry in the next few years, Deloitte has warned.

Ian Geddes, head of retail at the business advisory firm, told an audience at Deloitte’s Leeds office that shop vacancy rates in the North were more than twice those in the South and the situation looked likely to be exacerbated by the vast number of leases that are scheduled to expire by the end of the decade with little prospect of renewal.

“The supply of anything but the most prime retail space continues to outstrip demand,” he said. “But much of the existing space on the high street is no longer fit for purpose. The wave of impending lease expiries provides retailers with a fundamental opportunity to exit unsuitable space and realign their portfolios to their new omni-channel strategies.”

He added that in anything but the most prime locations almost all retail lease renewals in Yorkshire and the Humber could be anticipated to be negotiated at lower rent levels.

Mr Geddes said that a high street presence remained important for retailers, with recent research by Deloitte showing that 88% of retail sales are still generated in store, but that the demand was for fewer, larger units. He also said retailers needed to respond to consumer demand for greater value by developing new subscription and rental models.

Deloitte anticipates that demand for home delivery will start to flatten in 2015 as consumers continue to take advantage of the expansion in ‘click and collect’ services and the growth of retailer tie-ups, such as that between eBay and Argos. The number of ‘click and collect’ locations around the UK rose by 20 per cent in 2014. Ironically, it may be the demand for space and need for an extensive network of shops driven by click and collect models that persuades retailers to retain space at lease expiry rather than vacating.

“One of the issues retailers face with click and collect, however, is the additional in-store space it requires, particularly in high footfall areas,” he said. “I think we will continue to see new models being developed by retailers to meet that demand.”

Dan Butters, restructuring services partner at Deloitte in Yorkshire, revealed that the number of insolvencies in the UK retail sector had dropped from a peak of more than 70,000 in 2012 to less than 60,000 last year.

“By analysing why particular retailers fail, we are able to better predict where the next failures might be. We can then help those businesses with restructuring to make them leaner, fitter and more agile – and, therefore, less likely to fail,” he said.

Deloitte’s Leeds office advised on the recent company voluntary arrangements (CVAs) for Huddersfield-based Mamas & Papas and Thirsk-headquartered Austin Reed, and on the pre-pack administration for bakery chain Cooplands of Doncaster.