The collapse into administration of retailer Toys R Us could spell trouble for a retail park sector that has enjoyed a period of relative calm.
The UK arm of Toys R Us was put into administration this week, with Moorfields appointed to undertake an “orderly wind-down” that could yet see some of the business saved.
The market however is preparing for cash-rich retailers to cherry-pick the sites they need – and the discounters are expected to be at the forefont.
Craig Hudson, Manchester office head for out-of-town retail specialist agency Curson Sowerby Partners told Place North West: “It wasn’t necessarily a big surprise – they had a lot of large units at the higher end of the rental scale, where the turnover couldn’t support the rent.
“This will leave holes in North West retail, and history suggests that some sites will go relatively quickly, but some will be around for a long time – we’re only just seeing some of the old MFI units go.” The furniture giant went into administration in 2008.
Hudson said: “The likes of B&M, The Range and Home Bargains have been looking, and these are good operators that generate excellent footfall – but some stores will be highly rented, beyond the levels that they find reasonable. Where you’ll find problems will be on retail parks where there are already voids.
“It will come down to rental expectations and how much landlords are prepared to deal, and also in some cases if they’re prepared to subdivide, which is another cost.”
The toy sector has become consolidated, he said, with only Smyths Toys and Toys R Us as major specialists. Hudson said the former’s strategy has been smarter: “What Smyths has done well is take the right type of units at the rent they deem affordable, rather than chasing location.”
Stephen Cowperthwaite, head of retail at GVA, said: “Toys R Us was tied into a number of long leases and a key question for the property industry is who will take on these large spaces.
“The likes of Aldi and Lidl have tended to shy away from retail parks, preferring new, shiny purpose-built stores. But with both on acquisition drives the stores may present opportunities, as they will for The Range, Go Outdoors, B&M and Home Bargains.”
“One option would be reconfiguration, carving them into smaller units and appealing to a wider range of retailers, but this can be a difficult process.”
On market conditions, Hudson said: “Fortunately, we’ve had a period of relative stability, but with Toys R Us and Maplin going into administration, and a couple more on the watchlist, there’s a bit more uncertainty. Tenants’ positions have probably strengthened, but the number of tenants that are acquiring has been reduced.”
Stores are continuing to trade. Toys R Us stores in the region include the Peel Centre in Stockport, Central Retail Park on Manchester’s Great Ancoats Street, Trinity Retail Park in Bolton, Europa Boulevard Warrington, The Mall Blackburn, Chester Retail Park, Paisley Street Liverpool, Deepdale Retail Park Preston, The Lanes in Carlisle and Broughton Retail Park near Chester.
Dr Gordon Fletcher, operations unit head at the University of Salford Business School, said: “The constant change in the retail sector is now being felt in retail parks as much as the high street. These familiar brands have struggled to keep pace with the growing preference for online retail. But it is not just a matter of more people buying online, it is also what these retailers offered as their customer experience.”