March 24, 2021
Our latest report on retail and leisure market trends across 2020 is out now and available to download for free. 2020 was a year like no other, defined by one word - COVID-19.
The retail and leisure market was one of the most heavily impacted by the pandemic, with long periods of closure, restrictions around trading and social distancing making trading difficult or impossible. Our latest analysis tells this story through data and indicates that what we have seen so far is just the start of a wider impact to be felt across the sector for months and years to come. In this post, I discuss the key findings from our analysis.
1. EXPOSURE TO COMPARISON RETAIL HAS LED TO SHOPPING CENTRE RISK
Shopping Centres were the most negatively impacted of all location types in 2020, with a net loss in occupied units of 5.4%. The retail mix within these asset types tends to comprise of more non-essential retailers than other location types. On average, 57% of units in Shopping Centres are comparison goods stores, much more than the average for the High Street at 28%. The risk that this creates for Shopping Centres is evident by the data on the decline in the comparison retail sector, which lost 6,984 units in 2020, accounting for 62% of the total stores that were lost in 2020.
2. Lack of commuter and tourist footfall hit cities hard
The Vacancy Rate across City Centres increased by 2.5% to 16.1% in 2020, the fastest jump seen across all town profiles analysed. The move to remote working, loss of international tourists and cancellation of major sporting events and concerts which are key city centre attractions, collectively creative a sharp downturn in footfall. Two town profiles which benefited from the pandemic were Villages and Commuter Towns where vacancy increased by just 0.4% and 1.2% respectively, both below the national average increase of 1.6%.
3. Slowdown in redevelopment activity as the property market entered a deep freeze
There was a slowdown in property redevelopment activity for the first time in five years, with the number of retail and leisure units being converted for other use such as office and residential dropping by 16%. This was due to operational delays caused by restrictions during lockdown, landlords and investors delaying plans due to market uncertainty, and many businesses unwilling to commit the capital needed to complete work.
4. CHALLENGES AHEAD FOR OWNERS OF VACANT DEPARTMENT STORE SPACE
With the announcements that all Debenhams stores will close and even John Lewis will shutter more stores, landlords have a challenging task ahead in finding reoccupiers for large-format space. Of the House of Fraser, Debenhams or Beales department stores that closed between January 2017 and December 2019, only 24% had found new occupiers with no capital investment required. 30% of the former department stores saw some structural change either being demolished or split into smaller units. This is likely to be the favoured approach for the 124 Debenhams stores that closed at the end of 2020.
5. FUTURE DEMAND FOR RETAIL SPACE THE KEY FACTOR IN RETAIL REVIVAL
Despite the challenges in 2020, 39,060 stores opened their doors for the first time. 42% of these were prior to the pandemic with the rate of opening after March at an all-time low. Total online retailing values increased by 46.1% in 2020 when compared to 2019 (Source: ONS), This jump is likely to have a longer-term impact in 2021 as retailers opt for fewer stores. However, locations suited to support online operations such as those located out of town and on retail parks will boost store openings across 2021.
To download the full report, please click the image below.