September 14, 2017
LDC’s latest bi-annual Retail and Leisure Trends Report (titled ‘Turning Point’) published today shows that the second quarter of 2017 saw the number of shop openings reduce by 84% compared to Q2 2016.
The impact of this slowdown in openings resulted in a net loss of -207 shops in the second quarter versus a net increase of +1,284 shops in the first quarter of the year. The net difference between these two periods is the biggest fall between any two consecutive quarters in the past five years.
Whilst the historical data illustrates volatility over time, between the number of openings and closures, the overall number has reduced significantly. The number of openings reduced from the 2012 quarterly average of 4,006 to 2,995 (-25%) in Q2 2017.
The openings and closures activity was reflected in the Shop Vacancy rate that started to rise in the second quarter of 2017. It rose in both May (+0.1%) and June (+0.1%) to 12.2%. This, however, is still significantly below the 2012 peak of 14.6% (see Figure 1).
New vacancies (less than a year vacant) also increased from 3.3% of the total stock (total number of shops) to 3.7% by the half year point. The national shop (retail) vacancy rate stands at 12.2%.
Figure 1. GB Retail (Shop) vacancy rate 2008 - H1 2017 (Source: LDC)
The LDC report, which looks at the first half of 2017 also compares recent results to those over the last five years, and shows that:
- Retail parks have seen more net openings than high streets or shopping centres but are home to just 2.5% of all stores (units).
- High streets still house more than half of all retail and leisure outlets (50.5%).
- Comparison Goods Retail (non-food) was the only category in net decline in H1 2017.
- Independents generated 89% of the net growth in shop numbers since H1 2013.
- Barbers and Beauty Salons topped the growth tables in H1 2017.
- Estate agents entered the net closures Top 10 at number six in the first half of 2017, closing a net -91 units. Over five years they had increased in number by a net +134.
- Bank branches have headed the Service Retail closures table for the past half decade, but in the six months of H1 2017 Estate Agents took top position instead.
- Convenience (food) retailers topped the Retail fascia growth table in H1 2017, taking seven of the top 10 positions.
- The North West saw the biggest increase in the number of occupied shops in H1 2017. Greater London and the East of England saw the smallest increase.
- Central London lost more shops, net, than anywhere else in GB.
- Vacancy in Wales has fallen faster than in either Scotland or England - but still remains higher than both of these nations.
- Greater London has half the vacancy rate of the North West.
- Three towns, all in the South East, had zero vacancy by the mid-point in 2017 (Barking Road West, Dagenham and Erith).
- The three towns with the highest vacancy rate are the same as at the end of 2016 - and the vacancy rates of all three have increased (Burslem, Dewsbury and Newport, Monmouthshire).
Figure 2. Retail and Leisure vacancy rate by region of England, H1 2017 (Source:LDC)
Figure 3. Retail and Leisure vacancy rate by nation in GB and by location type, H1 2017. (Source: LDC)
Table 1. GB towns with the lowest vacancy rate, H1 2017. (Source: LDC)
Table 2. GB towns with the highest vacancy rate, H1 2017. (Source: LDC)
Matthew Hopkinson of LDC commented:
“There was a striking turnaround in the second quarter of 2017 especially when compared to the trends of 2016, in the number of shop openings. The impact of Brexit is clear with Q2 showing a net loss of nearly 500 shops versus positive growth in the previous quarter.
Not only has the trend turned negative with more closures than openings but the volume of activity has also dropped by 25%. Whilst the numbers are currently relatively small to the total number of shops, the vacancy rate in Q2 started to rise and is likely to continue to do so if the current uncertainty continues.
The role of physical retailing continues to evolve and the place that a shop has in the overall buying cycle varies from brand to brand and sector to sector. Stores continue to perform a vital role in the purchase cycle and consumer journey but the key questions remain around how many shops you need, what kind of format and in which locations. With rising costs everywhere for retailers, margins are being squeezed and therefore understanding these micro to macro location trends is fundamental for retailer success. Shorter lease lengths and more proactive management by landlords is likely to increase the number of openings and closures of stores and thus more fluidity in the UK’s high streets. The changes in the first half of 2017 are a clear indicator of the uncertainty that permeates across all aspects of the UK economy.”
The report’s findings will be presented at LDC’s 16th Retail and Leisure Trends Summit this morning at the offices of Berwin Leighton Paisner LLP in London. The report will then be discussed by an expert panel of landlords, investors and retailers for more information on the event click here.