Research by Colliers has shown retail rents dropping by 1.5% in the last 12 months, double the rate compared to the previous year, while some regional centres including Northwich, Chorley, and Oldham have all reported falls of more than 10%.
Speaking at the launch of Colliers’ Joining the Dots retail report, Lloyd Entwistle, director of retail agency for the North, said there has been “an oversupply of retail space dumped into the market in the first half of this year”, but a handful of areas have still kept ahead of the national average level in terms of rental growth.
These include Manchester city centre, where rents are up by 4%, and the Trafford Centre, where rents are up by 1%. In contrast, smaller centres including Oldham, Ellesmere Port, Northwich and Chorley have all seen double-digit rental declines over the last year.
Oldham had the largest drop in rents at 17% in 12 months, followed by Ellesmere Port at 14%; Northwich and Barrow-in-Furness at 13%, and Chorley at 11%.
Many of the region’s BHS stores also remain empty, adding to vacancy rates across smaller centres, which have increased by 4.5%
However, this does not include the BHS store on Manchester’s Market Street which is currently being turned into an outlet for fashion retailer Uniqlo, coupled with what Entwistle described as a “UK-first leisure offering”. An international fashion brand has also been lined up to take the former New Look unit, also on Market Street, while Metro Bank is taking an outlet nearby for what he described as a “record rent” for the area.
Central Manchester rents are now at £280/sq ft, the highest since the pre-financial crash level of £300/sq ft.
Entwistle said the sector was “in the eye of a perfect storm” with some “outdated, out-of-touch retailers not giving customers what they want.” He also singled out Chester’s £300m Northgate project, heavily criticised in open letter by more than 120 property professionals, as one of the schemes in the pipeline that could be under threat, and added: “The answer is not simply more retail.”
“The question is, can schemes be let without stealing tenants from elsewhere in the town? In many cases, the answer is an emphatic ‘no’”, he said. Cheshire West & Chester Council has since hit back at the letter criticising the scheme by arguing the city “needs to improve its retail offer”, stating: “We believe this because it is what retailers and our advisors tell us”.
Instead, Entwistle pointed to examples like Stockport where regeneration has been led with mixed-use and leisure developments rather than retail.
He warned developers to expect “a further polarisation” of the market, with many schemes “bending over backwards” to attract tenants.
He said more affluent regional centres, such as Skipton and Wilmslow, would continue to do well, but said secondary markets “need to be re-invented and re-developed” without “creating more retail space in an already saturated market”.
David Fox, head of retail agency North for Colliers, said he expected a “radical reshaping of the lease model” in the coming years, with five-year leases, turnover-linked rents, and limited incentives becoming the norm for shopping centres, following a model already being used by factory outlets.
He said “white box” unit specification would minimise capital-intensive shop fitting programmes while five-year leases with flexible terms would allow both occupiers and managers to remain agile as markets evolve.
“It’s a well-balanced solution for struggling locations, but will require different thinking from both investors and valuers,” he said.
The research from Colliers echoes a report from Cushman & Wakefield released earlier this year, which suggested retail rental growth in the North West was the worst in the whole country, with rents dropping by 38% in the last 10 years.