U.K. City-Center Store Vacancies May Climb as Consumers Try to Save Money
The number of boarded-up shops on Britain’s main downtown streets will probably rise in the coming months as struggling retailers move to the most profitable shopping locations.
“Retailers are looking to close older and poorer- performing outlets where possible and relocate into new stores in the bigger and better centers, streets and warehouses,” research company Local Data Co. said in a report based on a survey of 1,000 urban shopping locations in the U.K.
Some centers in the midlands and north of England are almost one-third empty, while vacancy rates remain at pre- recession levels elsewhere, the survey showed. Across the country, the average shopping street vacancy rate was little changed at 14.5 percent in the first half, triple the level of three years ago, when Local Data began its surveys.
U.K. retail sales dropped in August and consumer confidence fell for a third month as signs of a faltering economic recovery hurt confidence. Retailers face mounting competition as supermarkets boost non-food sales and online sales increase. Mothercare Plc (MTC), the children’s clothing and home goods chain, announced in May that it will shutter 110 of its 362 town-center stores across the U.K.
“The high street is a less interesting place to be,” Mothercare Chief Executive Officer Ben Gordon said in a telephone interview. “We are working hard to close our unprofitable stores.”
Closing Shop
Other companies scaling back their outlets include Carpetright Plc (CPR), HMV Group Plc, JJB Sports Plc and Thorntons Plc. Together they account for about 153 million pounds ($245 million) in annual rents, according to Investment Property Databank Ltd. This year’s insolvencies of chains including Focus DIY Ltd., Jane Norman Holdings Ltd. and TJ Hughes Ltd. will cut rental income by about 35.8 million pounds, IPD said.
Several of the U.K.’s biggest retail landlords have reported show “solid” growth in rents, footfall and occupancy levels, indicating that owners of prime space are taking market share from other locations, Local Data said.
Shopping-center owners Hammerson Plc (HMSO), Capital Shopping Centres Group Plc (CSCG) and British Land Co. all said in their first- half earnings reports that sales are rising among their tenants, lifting rental income and property values.
The 10 towns and cities with the largest share of empty shops are all in the West Midlands and northern England, while seven of the ten lowest vacancy rates were at centers in southern England. Almost 28 percent of shops in central Stockport near Manchester are empty, the highest rate for centers with more than 400 stores, Local Data said.
Government Cuts
Vacancies in cities outside London and southeast England will probably accelerate as government spending cuts begin to affect regions with proportionately higher numbers of public employees, Local Data said.
“The divergence between the best and worst shopping centers and the north-south divide is only going to get wider,” Matthew Hopkinson, the report’s author, said in an interview.
The polarization means that as many as 50,000 shops in less favorable locations across the U.K. may never attract tenants again, predicts Joshua Bamfield, a director of Newark, England- based Centre for Retail Research.
In May, Prime Minister David Cameron asked retail consultant Mary Portas, star of the “Mary Queen of Shops” television show, to conduct a review of the country’s town centers to help create a national revival plan.
“We must accept that some secondary retail units are no longer viable and plan their transition to other uses,” said Liz Peace, Chief Executive Officer of the British Property Federation, an industry group.
To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net
To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net
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