Global property company Colliers International’s 17th Midsummer Retail Report, has painted an improving picture for high streets, forecasting that the next seven years will see a gradual recovery to the peak level of 2006. Asking the question, Is the High Street dead?, the report which analyses the current state of the retail property market and what is in store for UK retailers, predicts a fall in the number of empty shops, from its current level of 12 per cent of total floor space to about 7 per cent by 2020.
Tom Johnston, director and head of retail with Colliers International in Scotland, said: “Scotland’s high streets are not dead but we’re at a critical stage and they need to be reinvented, and not just for retail.
“The next few years will determine the future of our high streets and we urgently need to create the right environment, which will allow these areas to find their new place in the community. For too long we’ve taken the heart out of these communities and as offices, schools, local government and retailers have dispersed, people no longer have a reason to come back.
“By providing a framework conducive to the rebuilding of the hearts of our communities, we can create affordable housing, family homes, leisure facilities, retail and other core services, such as medical and dental practices, that will create this momentum.
“However, this can only be achieved through a level-headed review of recent damaging changes to non-domestic rates policy, alongside a more flexible approach to planning. In particular, planning authorities must support a greater mix of uses. Without such moves and other innovative ideas, such as free parking weekends and compulsory purchase orders to kick-start such regeneration, we’re unlikely to see any significant inroads being made to restore our town centres.”
Colliers International predicts that the recovery in Scotland’s retail will be selective, with high streets facing increasing competition from larger prime retail malls.
Tom Johnston continued: “While reinventing the high street must be brought to the top of the agenda, high street retailers must also step up their game, so that they can compete with prime large malls. Many high streets are boring, compared to malls, and we need to give people additional reasons to return.
“There are lessons to be learned for the high streets from prime covered malls. These have successfully positioned themselves as draw-destinations, by offering a wide range of uses, activities and events, beyond just retail, all of which are specifically designed to increase dwell time.”
Mark Charlton, Colliers International head of research and forecasting, explained: “We forecast that the long delayed recovery in the retail market will start in 2014 but be focused on the big centres and smaller conveniences locations because the internet is forcing retailers to concentrate on larger ‘showroom’ stores in fewer locations.”
Scotland’s retail landscape - key findings:
John Duffy, director, head of in town retail Scotland for Colliers International, said: “We’re likely to see a new wave of retail development, which will start in 4-5 years’ time. However, the focus of such investment will be in the major regional centres such as intu Braehead, where a masterplan planning application, incorporating a significant extension to intu Braehead Shopping Centre, has recently been lodged.
“High street vacancy rates are beginning to plateau and coupled with a slow-down in corporate failures, we expect a less negative impact on the high street than in recent years. Our research also suggests internet retailing will be flatlining at 20 per cent of all non-food sales by 2020. As a result, online sales will no longer be as much of a threat to high street, as successful retailers will by then have aligned their internet and property strategies.
“The casual dining market continues to blossom, with Nandos, Carluccio’s, Frankie & Bennys, Wagamama, Yo! Sushi and Tesco-owned Giraffe supplemented by coffee operators Costa, Starbucks and Nero.
“Value and discount retailers are also continuing to expand, with 99p Stores entering the Scottish market, where Poundworld, Discount UK, Poundland, B & M and Home Bargains already have a growing presence.”
“The retail market in Aberdeen continues to buck the trend of the rest of the Scottish market, with a low vacancy rate and keen interest for well-proportioned, prime units. In addition to the mainstream fashion and comparison goods retailers, there is currently keen competition among banks and building societies. Aberdeen continues to thrive on the back of the oil industry, high levels of employment, extensive protected geographical catchment area and, arguably, is the Scottish equivalent to London’s UK role as an ‘economic bubble’.”
“Dundee is expected to receive a boost from having recently been short listed as one of the final four for the 2017 UK City of Culture. The city’s bid reflected the massive investment that is being put into redeveloping the Dock area, centred around the proposed Kengo Kuma designed V&A Museum. Dundee is beginning to attract overspill from Aberdeen, with large offshore engineering projects being carried out in the city. This is expected to feed into the retail market in the city and increase demand in the prime pitches, centred on Overgate Centre and Murraygate. While vacancy rates across the city are around double those of five years ago, there are however no new large developments currently planned in the city centre, this means any new demand generated will be focused on the existing prime stock and we anticipate an improved take-up for the next few years.”
Peter Muir, director, rating with Colliers International, Scotland, said: “A move to encourage people back into town centres will fail unless the Scottish Government addresses the growing discrepancy between non-domestic rates and the harsh realities of the property market. The move to postpone the 2015 revaluation by two years means rateable values will remain on pre-recessionary April 2008 rental levels. This decision must be reversed.
“Without realistic rateable values, any initiative to bring life back into Scotland’s high streets will turn out to be expensive window dressing. Businesses need the right framework and incentives to safeguard their future viability. In one town, where a particular property is now available for an annual rent of £18,250 with substantial incentives and the annual rates liability being based on a rateable value of £76,500, it is clear structural reform is urgently needed. However, the Scottish Government has decided to put economic regeneration on hold for a further two years.
“A recent decision of the Lands Valuation Appeal Court has all but closed any avenues of appealing these Rateable Values on the grounds of falling rents which adds further to the misery.
“The Government has dealt a double blow with its rating policy. Changes to empty rates, which came into effect in April, saw the 50 per cent liability levied on landlords with empty property raised to 90 per cent.
“The argument that this decision will force landlords to reduce asking rents and stimulate the regeneration of Scotland’s high streets is fundamentally flawed and based on and incorrect assumption. Property is driven by economics, namely supply and demand.
“Landlords have since the start of this current economic crisis reduced asking rents substantially but the harsh reality is that there is no demand. The new regulations will require landlords to spend additional revenue on rates, rather than refurbishing or reconfiguring empty units to make these more suitable for today’s retailers.”
Anthony Aitken, head of planning at Colliers International, commented: “Many developers will welcome the Minister for Local Government and Planning’s insistence that the economic benefits that development delivers are placed on an equal footing as environmental considerations, in terms of relevant material considerations, when considering a planning application. This strengthens the Government’s commitment to sustainable economic development and the recognition and weighting to be given to economic benefit is long overdue.”