Warning of 200 shopping centres in danger of failing
More than 200 UK shopping centres are in danger of failing, a retail research think tank is warning.
The demise of anchor stores such as BHS, TJ Hughes, House of Fraser and Toys R Us and the rise of online shopping is causing a “downward spiral”, and the recent Budget announcement of business rate relief for the “high street” is almost incidental to this decline.
There will be a business rates revaluation in 2021 but that could be too late for some of the shopping centres currently in private equity hands that are due to be refinanced, with shareholders waiting in the wings for a return on their original investment. Many at-risk centres are currently owned by US private equity firms. If some of the smaller centres that serve towns close their doors this could have dire consequences for communities and the business rate tax base across the county.
Recent research published in the Financial Times suggested about £2.5bn worth of shopping centres and retail parks are up for sale in towns and cities across the UK which, again, sets a negative tone across the whole sector.
One complaint of consumers is that the UK has too many shopping centres offering the “same old, same old” – both in terms of brands and products. Other smaller centres have seen a rash of nail bars and vaping shops open up to meet new trends but they are doing nothing to arrest or fill the void when larger units close. A classic example, the collapse of BHS two years ago, left vacant units in around 200 shopping centres and more than half of those large, empty units are still empty.
Nelson Blackley, from the National Retail Research Knowledge Exchange Centre in Nottingham said the growth of online retail in the UK – on sites such as Amazon – has been faster here than in almost any other retail market in the world. When you add in to the mix that retail makes up around 25% of the Rating List for England and Wales, we could be browsing our way to real issues for the retail sector and local authority revenues in the long-term.
Some initiatives are evident, the Chancellor Government announced last week £675m to create a “future high streets fund” that councils can access to reinvigorate their high streets – but what we seem to be lacking is the imagination of what needs to change. We had the “Shopping Czar” Mary Portas reporting on the plight of the high street some years ago but even those closest to the issue would be hard-pressed to name even one long-lasting effect of that intervention.
The shopping centres which look destined to survive are the ones which adapt and adopt new leisure side-lines to their portfolio, incorporating family activities and visitor attractions. Meadowhall in Sheffield applied and got permission for a £350m “Leisure Hall” extension to its existing retail offering; others such as Xscape in West Yorkshire have retailers and family leisure activities such as bowling and Lazerquest side-by-side. Whether current owners have the time or pockets deep enough to be able to fund these types of major turnarounds is questionable, particularly if you believe the FT figures that show so many shopping centres with official or unofficial “For Sale” signs on them at the moment.
This case centres on a substantial three-storey office block: Mexford House, North Shore in Blackpool.
Pressure is still increasing on the Government to take action on business rates after the latest national town centre vacancy rate reached 10.2% last month.
The Rating Surveyors Association has published its response to the Government’s current inquiry on how business rates policy has impacted business with some interesting recommendations.