It’s no secret that high street occupiers have not had their troubles to seek over the last few years, resulting in both shops and leisure operators closing, and in some cases being replaced by units in shopping malls and retails parks.
It’s also reasonable to conclude that the increase in online operations, both from established retailers and newcomers, and the low cost environment this brings, have played a part in this displacement.
However, we are now beginning to see those very same chains, in those very same retail parks and shopping malls beginning to feel the squeeze.
Earlier this year we saw the announcement from restaurant chain Prezzo that they would be closing around 100 restaurants, many of which are in shopping centres, with some also located in key city locations. The decision to close these outlets, including those at Glasgow Fort, Silverburn and Pier Place in Edinburgh, was part of a financial restructuring after securing the backing of creditors for a Company Voluntary Arrangement.
Prezzo’s announcement was preceded by similar announcements from Carpetright, the Byron burger chain and Maplin.
The issues on the high street haven’t stopped there unfortunately with the last couple of weeks seeing Gaucho filing for administration and discount operation Poundworld closing its remaining 190 stores with the loss of over 2,000 jobs.
The one thing all of these stories have in common is bricks and mortar, with much of it leased. And given the high profile locations, in most cases the Grade A space taken will not have been cheap, the capex on fit-out not inconsiderable and the length of the lease not short. We need to remember that leases, along with all of the additional costs such as rates and energy bills need to be paid for before any profit can be realised.
The challenges faced by high street occupiers are numerous, with difficult trading conditions caused by the drift away from traditional town centres, the economic uncertainty caused by Brexit and, of course, those low cost online operators. It’s often said on the retail front that you need “bricks to get clicks” but for how long will that remain the case?
In the main, we only tend to see stories about those big failures, the recognisable “high street” names. But it’s not only large corporates who are fighting on numerous fronts. Smaller, independent firms can also find themselves exposed to the same economic headwinds and in many cases they won’t have financial resources to save themselves.
It’s not all doom and gloom thankfully. Major towns and city centres will, as they have always done, adapt and regenerate.
It seems as though for every high street retailer or bank that closes there is a new restaurant or café operator willing to fill the void. That may not always be the case, but for the moment it helps to maintain the sense of place and vibrancy that is essential for any high street.
Paul Jennings, is Head of Commercial Real Estate at Aberdein Considine