Andrew Mear: Adapt to survive on the high street

Faced with an archaic rating system that is no longer fit for purpose, along with new shopping and retail habits plus competition from the internet, the time has come for a more direct system of taxation to replace business rates.

Under this, shoppers buying items in more fashionable or affluent areas would pay a purchase tax based on the value of that area – reflecting a tax system similar to the USA. There could be a tax rate from 2-15 per cent in the physical retail zone.

Equally, this idea could be applied to online shopping, by looking at the buyer’s postcode and adding the applicable tax at checkout. Changing the system would bring back a more level playing field, giving traditional retailers a fighting chance.

Equally under scrutiny are rents and with once prime retail properties no longer the ‘cash cow’ they have been, landlords are having to adapt to survive.

We are accused, in part, of hastening the high street decline but I would argue we cannot be blamed for the demise of a sector which failed to spot the change in consumer habits and the switch to online shopping quickly enough.

Add in a decision by many to opt for the ‘security’ of long leases with fixed rents, we can see that many retailers became the architects of their own downfall with landlords often left with no choice but to negotiate downwards on agreements in place.

But lower rents are, not in themselves, the key to survival. Many businesses have no appetite to be in certain areas: increasingly it’s now all about what an area has to offer in terms of location and leisure experiences. Retail zones will inevitably contract with bigger businesses and multiples wanting to focus on large shopping centres. City centres such as Leeds, Manchester and York are enjoying a surge in popularity while many peripheral areas are experiencing a slow degeneration.

It is those locations that combine leisure, experience, tourism and retail that will survive with Windsor, Stoke-on-Trent and Skipton among those offering all the requisite elements.

Businesses themselves also need to embrace new technologies or find themselves irrelevant in the future. And property owners will need to rethink how they manage their portfolios.

As a landlord I currently benefit from high occupancy rates, mainly thanks to good business practices, the strong economy and realistic rents. Figures show rents have either reduced or stagnated for the last decade, while costs, legislation and requirements have gone up.

Bricks and mortar retail is under severe strain, much of it only slowly transitioning in a quickly evolving market. I predict online sales will continue to rise but should plateau over the next 10 years, at which point there will be too much retail space. As the market adapts, this over supply will either find a new purpose or become redundant.

In a decade’s time, investors who concentrate on a diverse, experiential and leisure-based retail market will be the ones who profit from the success of the changes which must come if our high streets are to survive.