Lease renewals could spell high street trouble

Recovery on the high street “hangs in the balance” as high volumes of town centre leases reach renewal in the coming years, Deloitte has warned.

The professional services firm said most of the existing high street real estate is not fit for purpose, leaving the prospect of high vacancy rates at renewal.

But Ian Geddes, head of retail at Deloitte, said renewals provide retailers a “fundamental opportunity” to exit unsuitable space.

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Around 88 per cent of retail sales are still generated in store, but demand has moved towards having fewer, larger units.

Speaking to The Yorkshire Post, Mr Geddes said companies must incorporate innovations such as subscription and rental models, alongside multi-channel services, in order to grow.

While retailers in existing premises face issues with the additional in-store space required for click and collect, Mr Geddes said there must be continued focus on new ways of offering more flexible delivery.

Research from Deloitte found that a third of in-store purchases – which amounts to almost £100bn in sales – are influenced by digital contact before, during or after sales.

The growth of ‘click and collect’ is a key part of bolstering the health of the high street, Mr Geddes said.

He said: “The high street is still important, it’s not going away, but there are some significant changes happening and retailers have to think these through.

“If their leases are renewed, how many stores do they need and what type of store and what services are they going to offer?”

Subscription and rental models are likely to become prominent in 2015, Mr Geddes predicted, following trends in the US.

Cosmetic company Birchbox, which sends a personalised box of products and complimentary samples each month for a $20 (£13) subscription, has proved a success across the Atlantic.

“You end up receiving a box that exceeds the $20 you’re spending so you’re getting very good value; it’s also quite exciting because you don’t know what you’re going to get and it’s personal and relevant,” Mr Geddes said.

Stabilising logistics and supply chain management is now also at the top of the agenda for retailers, as many fell foul of dramatic peaks in the run-up to Christmas.

He said: “Investment and hard work behind the scenes is required to ensure your business can satisfy your customer needs.”

Figures from the Office of National Statistics last week showed year-on-year growth for retail sales of 5.4 per cent in January.

However, the quantity of sales was down 0.3 per cent from December, despite significant increases in petrol stations and department stores.