Growing footfall across Scottish retail destinations is a welcome relief, but the rising cost of living crisis and inflationary pressures will present new challenges according to Colliers' Midsummer Retail Report.
However, there is still demand for the right opportunities on the high street at re-based rental levels for operators who see a future in bricks and mortar retail.
On Scotland’s premier retail pitch - Glasgow’s Buchanan Street - we have seen a resurgence in leasing activity albeit at re-based Zone A rates. Confidence has returned with a flurry of deals signed including a new 35,000 sq ft flagship store for Laings jewellers together with lettings to Rituals, Dr Martens and Watches of Switzerland.
Pre-pandemic Zone A rates peaked at circa £325 per sq ft but we have seen a range of deals done between £150-£230 per sq ft Zone A in the last 12 months with projected growth anticipated going forward. Elsewhere in the city, we have seen planning applications lodged by both landlords of St Enoch Centre and Buchanan Galleries for predominantly mixed-use schemes. We do not envisage any developments in the immediate future but these applications will essentially future-proof both assets, reflecting the diversification away from overdependence on retail, which will be more sustainable for Glasgow going forward.
Looking east to Edinburgh, the much-anticipated St James Quarter opened its doors to the public in June 2021 and to date has been a great success. In addition to the established brands such as John Lewis, Boots and Zara opening, we have also seen Scottish debuts for H Beauty (Harrods), Bershka and Stradivarius among others. A number of leisure operators have also committed to the scheme including Everyman, TOCA and Bonnie & Wild.
As a consequence of St James opening, we continue to see a shift in Edinburgh’s retailing centre of gravity eastwards with high void rates at the western end requiring landlords to be creative in repurposing their assets. The former BHS located in a central position on the street is close to being let to Flannels for a 24,000 sq ft flagship split over two floors, showing there is still demand for the right product in the city. George Street does not appear to be as badly affected as Princes Street as the high number of voids on the street are now largely under offer following a flurry of activity in the last six to nine months. In a similar vein to Glasgow’s Buchanan Street these deals have been done at re-based rental levels.
The out-of-town market has remained more resilient throughout the past 12 months with demand driven by the food operators, discounters and gym operators. Active operators have included Home Bargains, Lidl and Pure Gym. Australian multi-national retailer Harvey Norman is looking to enter the Scottish market with large 60,000 sq ft stores within the central belt.
The drive-thru market continues to thrive with competition for sites fierce amongst the likes of McDonalds; Costa and Tim Hortons. New entrants to this market are emerging from new brands entering the UK such as Popeyes Chicken and Wendy’s.
Given the rising cost of living crisis, the next six months will be challenging with a cautious outlook from retailers. Leasing activity will continue but at re-based and sustainable rental levels. We anticipate a slow down in the food and beverage sector, except for fast food as consumers budgets are constrained.
About the author
Ross Wilkie has been at Colliers since 2015 and has been involved in the leasing and asset management of high profile shopping centres across Scotland including; The Centre, The Eastgate Centre, and the St Enoch Centre. His landlord clients have included Land Securities, Hines and Grosvenor amongst others. Ross has also been heavily involved in retailer acquisitions with clients such as Holland & Barrett, Joules, Oliver Bonas and The Gym Group.
To contact Ross, email Ross.Wilkie@colliers.com