As many as one on three UK retails premises are now ‘zombie shops’ that are either vacant, or not producing income, or occupied on only a short term basis.
Analysis from commercial property specialist Colliers in its latest Midsummer Retail Report has revealed the scale of the impact of the pandemic and changing shopping habits upon the sector.
The annual report looks at trends across retailing and their impact on the property market which supports UK shopping. Whilst a growing number of retailers are taking advantage of reduced rents – which have fallen by as much as 50% since their peak in the noughties – to access new and better trading positions, the report also details the ‘brutal’ transition that is taking place.
Colliers’ Head of UK Retail, David Fox, observes: “Notwithstanding the best efforts of the Government, the ‘surgery’ that UK retail continues to undergo is brutal and that has been vividly illustrated throughout the property market which it supports.
“There’s consensus that UK retail property void levels are around 15% but if you also take into account the stores that are let on flexible agreements, post-CVA terms etc then the real void rate must be double that.
“So, we would estimate that around 1-in-3 shops in the UK are either vacant, not income-producing or occupied on very short-term arrangements.”
However, the Colliers Midsummer Report also highlights positives for the retail sector, noting that the record level of UK household saving in 2020 – which totalled over £200 billion above the long-term average – is now being spent as people become more confident that the end of the pandemic is in sight and that the economy will move forward again.
For London, these changes in the retail landscape do hold some opportunities. Despite suffering from the lack of tourism and thousands of workers working from home, a growing number of brands are taking the chance to lease property in the capital, which is being offered on attractive terms and in prime locations where space is usually scarce.
Paul Souber – Colliers’ Head of London Retail Agency – comments: “What we’re seeing is occupiers realising that there’s a once-in-a-generation opportunity to establish themselves in London on very attractive terms with rebased rents. We’re currently tracking active requirements in the market which equate to around two million sq ft of space”.
With lockdown restrictions extended until 19 July and the commercial eviction moratorium extended to March of next year, Colliers is calling on the Government to do more to reconcile the interests of landlords and occupiers.
David Fox comments: “The extension of the commercial eviction moratorium means there will have been a two-year pause on landlords’ ability to collect rent from their tenants. By any measure, that’s an extraordinary length of time for businesses to be rendered unable to function effectively.
“Of course, lockdown has been an equal challenge to tenants and the pandemic has demonstrated in the loss of jobs and livelihoods just how very important the retail and leisure sector is to the economy and wider society. The moratorium extension has been generally welcomed by various representative bodies across the sector, but it will also give further wriggle room for those tenants who have taken advantage of the situation.
“This will make it even harder for many business owners who are facing their own continuing crisis to have a sensible dialogue with these tenants.
“Whilst free market economics must be allowed to be the driving force of changes in the industry, thoughtful legislation and regulation would allow breathing space so businesses can assess options, adjust business models and seek investment for stabilisation – and even opportunities for growth in a rebooted market.”