Business rate increases, Brexit uncertainty and the general economic environment helped to create a perfect storm which is wrecking a growing number of retail businesses, according to a Yorkshire property expert.
Well-known names including House of Fraser, Poundworld, Carpetright, Mothercare, The Original Factory Shop, New Look, Select and now probably Homebase, appear to be adopting CVAs at an accelerating rate.
But whilst external forces are a contributing factor, they don’t tell the whole story, according to David Fox, head of retail agency, North, at Colliers International.
Speaking at the launch of the property agent’s latest Midsummer Retail Report in Leeds, Mr Fox said: “The blame cannot be laid entirely at the door of external forces. Too many retailers have failed for years to adapt their offer, while others have been financially structured in a way that has severely impaired their prospects for survival.”
There was little in the way of good news in this year’s report. Rental growth in the retail property sector has halved since last year from 1.6 per cent to 0.8 per cent nationally, although in Yorkshire both Harrogate and Hull saw rents increase.
“The pace at which rents are softening will quicken through to the end of the year while this descent steepens. It’s inevitable that by this time next year, growth will again go negative,” Mr Fox said.
Addressing the regional picture, Olivia Hughes, associate director of retail agency North at Colliers, said: “All locations are under some pressure but naturally the strongest cities are generally faring better.
In Leeds, prime shopping areas are remaining strong, she said, with several new retailers moving into the city centre, including iSmash and NYX. Meanwhile, JD acquired the former H&M store on Briggate in Leeds on a 15-year lease at the highest rent for this location.
The Athleisure fashion trend, in which clothing designed for workouts and other athletic activities is worn in other settings, is seeing expansion and growth, Ms Hughes added, with retailers adding fitness fashion ranges to their stock. “This whole market is worth in the region of £2.5bn,” she said.
Meanwhile, James Watson, retail capital markets, said last year may prove to be a watershed year for UK retail capital markets. “Shopping centres have been doused by reality, even if some owners remain in denial and continue to refinance,” he said.
He added: “In the meantime, those with asset management skill, and some cash, could lock into bargains and enhanced income returns.”
The Midsummer report also contained research into online shopping, commissioned from YouGov, which found that the growing generation of online food shoppers, alongside the increasing competition from the likes of Amazon Prime, poses an ongoing challenge for supermarkets nationally.
The growing proportion who will in future do their food shopping online is, according to Mark Phillipson, head of retail group at Colliers International, “a major headache for the supermarket operators” because at present it is not a profit-making area of their business.
Yorkshire is the region in the UK which currently shops for groceries online the least, according to the research, with only 23 per cent of respondents currently buying their groceries online.
Mr Phillipson added: “The supermarket chains need to find a way to make this part of their business more profitable.”