Resilience in retail: a marker of the future of commercial property?

By Katie Girdwood

There is a lot of negativity when reporting on the retail and leisure market - it’s not uncommon to see phrases like the ‘death of the high street,’ or even  ‘retail apocalypse’ being bandied around. At the Local Data Company, we not only report on the top-level figures (which can, on the face of things feel negative) but on the layers of intricacy which our uniquely granular and historical data allows.

In our latest report, we look at the retail market through a more strategic lens, focusing on long-term occupancy trends, which we have named (rather optimistically) ‘survival rates’. If you haven't done so already, you can download the report via the button below.

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We define ‘survival rate’ as the percentage of units within a certain cohort (location type, retail and leisure category or brand) which remain operational 1 year, 3 years and 5 years from the date of opening. This paints a picture not only of historical performance but allows us to look to the future to understand the likelihood of long-term success for retailers.  This new analysis provides critical intelligence for landlords in their search for new tenants, uncovering categories that would not have been considered previously and drawing attention to a broader range of growth categories.

 

early stage growth shaking up the sector

With the much-publicised struggles of legacy retailers, we have been keen to draw attention to the host of new retailers coming through into the market, such as CBD stores (named rather discreetly as ‘alternative medicines’ in our database), barber shops and nail and beauty salons. Whilst we celebrate these green shoots of growth in the market, it’s also important to understand the longevity of such categories.

 

men-having-their-hair-cut-crop small

 

Astonishingly – and in contrast to what we often see reported in the media - over two thirds of all occupiers have been operational for over 5 years since 2012. Perhaps the most interesting point to note is the variance across categories, with tenants in traditionally sought-after categories such as fashion now finding themselves outlasted by non-traditional upstarts. It’s also key to note just how much variance there is by shopping format, with over 75% of retail park occupants remaining operational over 5 years (compared to little over half in shopping centres).

Of course, it’s important we bear in mind the increasing flexibility of the property market. Shorter lease lengths, pop-up formats and new concepts such as competitive socialising aren’t to be ignored - they provide alternative avenues for landlords, as well as a much more diverse shopping and leisure environment for consumers.

Eagle-eyed readers will note that the top 5 categories by 5-year survival rate – accommodation, fuel, entertainment, dry cleaning and chemists - cannot be replicated online, a trend we have been watching closely for the past few years - showing that robustness and stable consumer demand should still play a part in any retail investment decision. In terms of survival by brands, it’s surprising to see that retail businesses with the highest proportion of units which survive beyond 5 years are classified in the top 10 declining categories. This highlights the protective effect of a strong, well-managed brand, and neatly illustrates how looking at retail segment alone doesn’t tell the full picture.

So, what’s to come? Looking forward, I’m most keen to track the survival rates of categories which have been growing consistently over the past couple of years, including barber shops and vegan restaurants - I’m  always fascinated to learn of success and longevity of new concepts which will ultimately change the structure and format of retail assets in the future.

 

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Actionable insights 

Finally, and most importantly, the application of this new metric will be game-changing for those working in the property sector (among others). Applying these survival rate figures to a scheme or portfolio of assets, will allow for forensic tenant evaluation; providing a mechanism to determine levels of risk associated with certain brands or businesses. It will also support investment strategy, asset selection and due diligence, providing another layer of data on which to base critical investment decisions. Both leasing and placemaking personnel will be able to use this data to support the quest to fill space and determine what the retail assets of tomorrow might look like.

We will be hosting a webinar on February 20th at 3pm in which we will discuss key issues raised in the report on resilience in the retail and leisure market. During the 45-minute session we will share case study examples of the trends highlighted in the report and discuss applications for this new analysis. We will be joined by Tom Berry, Senior Analyst at CBRE who will take questions from the audience, alongside report author, Ronald Nyakairu.

Follow the link below to register for a place at the webinar:

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