In recent years many vacant retail units have been taken by food and beverage operators but as this sector has also come under pressure the level of empty units on high streets and in shopping malls is becoming an increasing problem.
This situation has arguably been more acute in the US where even New York City has had the number of vacant units running at seriously high levels and which have outstripped those in London and other parts of the UK.
But there have been some changes taking place of late as rent levels in NYC have been falling. In some areas they have declined by as much as 30% with the result that many newer retailers have been finding it financially possible to move into areas that were previously out of bounds. Online-only brands have also been tempted to make a move into bricks and mortar on a trial basis.
What has also helped matters for these retailers is that landlords have been much more willing to offer them flexible leases that no longer involve the traditional long agreements. Retailers with such arrangements have been dubbed ‘place-holder’ tenants who have been able to cut these short-term deals with landlords on the basis that things will change (and revert back to normal) when the market recovers.
It could well be argued that there won’t be a market recovery as such and that these new tenants are the future of retail and that landlords will simply have to get used to this new market dynamic where rentals have fundamentally changed.
What has also taken place in Manhattan is that these new-to-the-high street retailers are not wedded to taking units on the established prime thoroughfares like Broadway and Fifth Avenue. Their ability to use social media to drive people to their stores in secondary locations means they no longer need to be in the most visible (and most expensive) spots.
This has led to these off-prime secondary roads being regarded as the new places to find the cool brands, which has led to them becoming destinations in their own right. Certain roads in areas of New York’s Soho, for instance, have become the places to go for specific streetwear brands.
It is clear that there are multiple things at play here that are affecting the retail property market in the US. How much it affects the long-term situation over there remains to be seen but what we can probably be sure about is that this same scenario will also be played out in the key shopping metropolises within the UK.
Glynn Davis, editor of Retail Insider
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