Around one in five shops could close between now and 2018 and in some mainly northern areas the loss could be as high as one in three.
This structural change in retailing, brought about by the way we now shop on-line and out of town, has huge implications for jobs, town centre environments and commercial property landlords.
The Centre for Retail Research (CRR) report – Retail 2018 – says that High Street shopping will continue to decline as online shopping rises steadily over the next five years, and warns that many High Streets could see more than 20% of their shops close down.
With the possible loss of around 60,000 shops and 316,000 retail workers, the CRR believes the future for many town centres is a big shrinkage in retail space and an increase in housing development, using redundant commercial premises.
Shoppers are deserting the High Street in doves with consumer spend declining from around 50% in 2000 to around 42% by next year. The CRR thinks online shopping will continue to expand and the proportion of shopping done via the internet will double from its present 12.7% to 21.5% by 2018.
With so many transactions now processed on-line, many of the larger retailers are planning to reduce their property estates by around one-quarter to one-third their existing sizes over the next 5 years or so. The report states that those retailers with an already strong internet presence will look to having around 70 destination stores, arguing that is all that’s now needed to create a national presence, compared to the 250 required in 2005.
Particularly badly affected, the report thinks, will be those retailers in pharmacy, health and beauty stores; with music, books, cards, stationery, gifts and DIY affected next.
Some towns, most major cities and other niche centres will continue to prosper, particularly those with heritage or tourist attractions and those near affluent districts, with high incomes and low unemployment.
The retail centres most vulnerable will be secondary and tertiary shopping areas in towns with populations on low incomes and with high unemployment. An even greater impact is predicted for neighbourhood stores with declines of up to 26% expected.
Although the prospects of decline can easily be exaggerated, and there is much controversy among commentators as to the potential future of the High Street, the Portas Review being a case in point, there is no doubt the evidence all points in one direction. As the report says:
“UK is facing a crisis. Retailing and retailers will either make clear strategic decisions that permit online retail to coexist with other retail channels in a multichannel world allowing bricks and mortar retailers to transform themselves, or, by avoiding making these decisions, multiple retailers will disappear or be so mortally wounded that a large minority of business categories become dominated purely online retailers”
The consequents of this will affect us all in one way or another: there are many hundreds of £billions tied up in pension funds invested in commercial property in the UK, not counting investments backed by loans from the major banks, much of which will not be repaid, and assets owned by small commercial landlords. This predicted declining in demand for retail property will have a dramatic effect on rent levels and therefore commercial property values over the coming years.
By Tom Entwistle