On 17th September I was interviewed by BBC 3 Counties Radio (The JVS Consumer Show) about the impact of high town centre vacancy rates on retail. I was then approached by International Supermarket News on the same topic, so the article that follows is the output…
Vacancy Rates in UK town centres are at a record high
Vacancy rates in some of the town centres across the UK are still at a record high and the impact is far reaching – landlords, retailers and consumers all affected. When a town centre has high vacancy rates, above 20%, consumers stay away. The aesthetic creates a bad impression – the implication is that there is a lack of choice and that the town becomes perceived as a less desirable area. Of course this creates a downward spiral as more and more consumers stay away, the shops which were doing well begin to under perform, and eventually may also close.
What has caused retailers to migrate away from town centre premises?
With the downturn many retailer chose not to commit to extensions to their leases in towns where they didn’t have strong trading, avoiding the risk of a shop becoming loss making. Leases historically have been lengthy commitments, often 3yrs minimum, and in spite of interest rates falling, upward only rent reviews have been the norm!
Business Rates are now payable even on vacant properties…
Changes to business rates on vacant property have encouraged many landlords to offer short term leases and some local councils are helping retailers to test the water in an area with “pop up shops” – to really see if they can commit longer term to an area.
But it is slow progress.
What should a new start up retailer think about when looking at property?
A new start up retailer, or a smaller chain looking to expand, really needs to think hard about what property to commit to. Some things to think about include:
- Areas with low vacancy rates will cost you more, but there is a reason for this! Chances are the footfall is much higher and so it may well be worth the investment. Have a look at what sales per square foot you can achieve and what your margins are. Consider all of your costs and if you can afford the rent it may actually be a lower risk option…
- Conversely areas with higher vacancy rates may offer inducements to get new business into the area, hoping to reinvigorate the town centre – if you negotiate hard you may get a very good deal and a short commitment period, meaning you can give it a try with minimal risk. If it goes well you will be getting a better return per square foot, if it doesn’t at least you can pull out with limited damage on a shorter term lease.
And there is no right or wrong answer – just be aware of the pros and cons and how you can take advantage of the pros or mitigate the cons…
What should ANY retailer, regardless of size, be considering when looking at new premises?
In all cases when looking at new retail locations the key and most important consideration is if what you will be offering to that local market matches what that local market wants. Here are some ideas, of course, this is by no means an exhaustive list, and, if you are committing to a lengthy lease a fully costed business plan would be a good idea!
- Will the offer be right?
- Can you provide adequate range and choice?
- Can you offer the product at the right price point?
- Is there much competition (actually some competition helps! An area with 1 shoe shop won’t be “the place to go for shoes”, an area with 5 shoe shops means whatever you want with that kind of choice you’ll surely find something! – so local competition is good, so long as you can carve your niche and the market is not saturated!)
- Also, If you can’t compete on price can you compete on service?
- Can you collaborate with other local retailers to offer linked offers and promotions?
- Will the premises be able to provide you with adequate presentation space and storage space?
- Are there any obvious barriers to footfall?
- And, what can you do to create a great deal of “noise” about your arrival? – Social media, local press, launch parties, special opening offers and local internet marketing can all help…
What future is there then for our town centres?
In summary, new blood to a town centre can turn its fortunes around and bring the consumers back but it will be a long and slow process. I can’t put a positive spin on it, but then, as they say, Rome wasn’t built in a day!
Landlords and local councils know this and will actively support it with the aim to accelerate progress. From the consumers’ perspective town centre shopping is usually based on 2 customer missions – convenience or entertainment e.g. – Passing by / popping out on a lunch break / just need a few bits so won’t trek to the supermarket vs. a day out browsing, experiencing the shops and maybe buying on impulse / enjoyment not on “needs”.
Ultimately of course, if you can’t market and present your store in such a way as to satisfy these customer missions then the out of towns will still take their share of wallet…