According to a new study
In its latest Midsummer Retail Report, Colliers International says that although average prime rents and the overall level of empty shops have improved slightly, the gap between the best and worst retailing locations has become more pronounced.
Colliers’ Head of UK Retail, Mark Phillipson, comments: “UK prime retail rents are up 1.8 per cent year-on-year – the best increase since 2008 while prime shop vacancy is down 0.2 per cent – the first nationwide improvement since 2014.
“But the proportion of the 420 locations we monitor which saw rents fall more than doubled, while the volume of shops that have been vacant for more than a year increased by 20 per cent. Both these measures had been previously improving during the past two years, and this reverse signals a step-change which is widening the gulf between the best and the rest.”
Even in London – which has seen double digit rent increases in recent years – rents have only moved up by 3 per cent, and Colliers are predicting that they will remain flat for the next 12 months. The consultancy estimates that on Bond Street – one of the world’s most prime shopping locations – around 25 shop leases are being quietly marketed by the brands.
Paul Souber – Colliers’ Head of Central London Retail Agency – comments: “London is still a phenomenally strong shopping environment but the market has cooled. The more positive news is that the capital is still creating new flourishing pitches. The shopping offer on Tottenham Court Road is being transformed and we’ve seen top rents on the street increase by 7.5 per cent – more than double the London average”.
The strongest performing retail market was Scotland where top rents increased by 4.5 per cent year-on-year.
The polarisation of the sector is also impacting the attitudes of investors who are buying retail assets. During the past year, the best performing retail-related property assets have actually been the logistics facilities which help fulfil online shopping orders.
Colliers’ Head of Retail Capital Markets, James Watson, comments: “For the first time, these logistics assets – the ‘shops you can’t shop in’ – are selling at prices which are keener than all but the best trophy retail assets”.
The retail investment market is experiencing a shortage of stock at present but this may be about to change.
Watson comments: “An increased supply of stock from forced sales in the secondary markets may not be that far away. This is not great news for those who are sitting on assets where the debt-value equation is heading in the wrong direction, but it will be positive for buyers who are sitting on a mountain of cash”.