Retail Pain - Flatulence or Birth Pangs?

 

That there is currently pain for both retailers and retail locations is not in doubt. The incentives required to attract tenants to new developments have increased. Retail occupancy costs are rising more quickly than gross profits. The conditions in the U.K. retail market are tough and will continue for 2 or 3 years. The views expressed by the Colliers’ Midsummer Retail Report are widely held.

 

The common expectation is that after this difficult period, the market will right itself. This period of flatulence will pass and the established patterns of development and leasing behaviour will again be appropriate.

 

FSP has pulled together a set of information that questions this assumption. FSP believes that the current pain in the retail market may not be transitory but the birth pangs of a new order in UK retailing. There is evidence that a new pattern of retailing is emerging that will call for new priorities to optimise the retail potential of town centres.

 

FSP has looked at the impact on town centre retailing of four well-recognised factors:

 

·        Internet sales – market share expected to increase from 11% this year to 19% in 2018

·        Supermarket non-food sales –share to increase from 11% in 2008 to 17% in 2018

·        Ageing demographic profile of UK population has different priorities for town centres

·        Dysfunctional planning system makes town centre development painfully slow

 

The overall effect is that within 10 years, the share of the non-food market taken by town centres will fall from over 60% to less than 45%.

 

FSP believes that the continuing decline of town centre retailing is not inevitable. The challenge stems from the lack of cohesion amongst stakeholders (planners, retailers, Government, investors and representative bodies) that has created the problem. The need is for joined up rather than piecemeal actions. However, there is no simple, one size fits all, panacea. Evidence from FSP surveys shows that while there are consistent regional variations, each town requires an individual solution. In reality, the customer, or more accurately the citizen, is king. Unless the interests of the key customer groups are taken into account particularly in advance of new developments, they will increasingly opt to shop where they feel more at home.