Retail property market further polarises

Now we all know that Rotherham is no London. But the difference in the vacancy rates of shops at these two locations could not be more stark.

The recent National Retail Barometer from Colliers International shows vacancy rates in the centre of Rotherham are running at almost 30% whereas on London’s prime shopping thoroughfare, Oxford Street, the rate is a little over 1%.

The news from O2 that it is closing 40 of its 493 stores (reported on Retail Week) did not come with any specifics about which stores will get the chop but it’s more than likely they will be in Rotherham rather than London – even though the company probably has a dozen shops on Oxford Street alone.

This highlights the growing polarisation around the UK between the haves and have-nots (in Rotherham you can have loads of shops, Mr Retailer, but you haven’t a hope of finding anything in the capital).

Large units in prime locations are still very much in demand and it is the appetite for this specification that has been the main driver behind the first UK-wide fall in vacancy rates for four years. The proportion of vacant retail floorspace fell in October to 10% from 11.4% in April.

Although this is a major improvement, just compare it with the paltry 6.4% of voids around in October 2006, which shows just how far things have deteriorated in the UK’s city and town centres.

But while this represents good news, the reality is that we are in a new polarised shopping world. Whereas the proportion of vacant space along primary shopping frontages is now only 5.2% (below the long-term high street void rate) the void shop units in secondary locations now account for three-quarters of all empty units.This is up from 69% only 12 months ago.

The primary shopping space undoubtedly benefits from having more larger shops that are now the unit of choice for expanding retailers – notably the multiples. In contrast, trying to fill a small unit in the middle of nowheres-ville is becoming a real tough one for landlords.

Just consider that the UK void rate continues to run at more than three times the rate for central London. And the gap between these two has grown by 500% over the past four years.

So polarised has it become that while property in prime shopping locations is snapped up relatively quickly – when it becomes available – the Colliers research shows the average length of vacancy continues to rise. The percentage of vacant units unoccupied for 12 months or more has increased from 55.7% in April to 59.3% in October. It was a mere 37.8% in October 2008.

What has not helped secondary shopping locations is the recognition by the big multiple retailers that they can operate from fewer, higher quality locations. Research from CB Richard Ellis in 2009 found retailers are able to access 50% of the population of the UK with only 90 shops, compared with 200 in the 1970s. (I wonder if this means they can access 100% of shoppers with 180 stores!)

Is it any wonder therefore that pop-up (or more apppropriately named – very short-term lease) shops are becoming a feature of the British high street as landlords outside the prime areas are keen to avoid operating in ghost-towns.