At the end of last week, the Local Data Company (who, incidentally, we follow closely – they’re great!) released their latest report. Detailing the performance of commercial property in retail and leisure, Looking Beyond Lockdown covers the first half of 2021 and contains some pretty enlightening data.
It’s well worth reading the whole report (linked above and embedded below) but there were a few statistics, in particular, that got me thinking.
Nationally, the picture is quite grim, with vacancy rates at 14.5% across all Retail and Leisure. Although the LDC is quick to point out that the growth in vacancy rates has slowed somewhat since H1 2020, it’s still rising.
"The real problem beneath rising vacancy rates is the increasing proportion of space that has been vacant for long periods of time.”
The picture is not nationally balanced, either. London is one of the worst-affected regions with a combined vacancy rate of 10.7%. This is surely driven by the Government’s “Work From Home Order” but it remains to be seen how forward-thinking landlords will adjust to the ‘new normal’ and rebalance their tenant mix to accommodate fewer commuters and a slowly-recovering tourism market. In the North-East, too, the picture is similarly worrying – the overall vacancy rate there is at 21.2%, meaning that more than one in five retail and leisure premises is vacant. As the report points out, across the UK, “the real problem beneath rising vacancy rates is the increasing proportion of space that has been vacant for long periods of time.”
Larger chain stores, whose gargantuan units have dominated UK high streets for the past 35 years, are hard (read: expensive) to repurpose and it seems like many institutional landlords would almost rather leave them empty than undertake the extensive capital expense of making them work for today’s shoppers and town centre visitors. One other interesting insight from the LDC report is the difference between town profiles – city centres and seaside towns have taken the brunt of the negative effects of COVID, while commuter towns and villages have remained more resilient.
The LDC report is balanced and nuanced, based on a huge amount of data gathered by in-the-field researchers. But that won’t stop hacky journalists (even those at the BBC) from making the most of the opportunity for another “death of the high street” article. Such articles are invariably accompanied by stock photos of “Store Closing” hoardings or lettings boards lining deserted high streets (see here, for example).
But when I read the report last week, I wasn’t so much dismayed as I was heartened.
Because, at the core of the report is the kernel of something that we, at Qualifyr, have been very focussed on for almost two years now. It’s almost like it’s a secret that nobody, outside of regeneration practitioners, CRE nerds and community activists, seems to want to acknowledge:
Independent businesses are kicking ass right now.
This isn’t true just of the past 20 months, since the beginning of the pandemic. This has been ongoing for a while now. And, as the LDC report puts it, “in H1 2021 the performance gap between the multiple and independent sectors continued to widen”.
In fact, during the first six months of this year, there were a total loss of 5,251 units occupied by multiple (corporate) businesses, while the independent sector saw a net gain of 804 units.
This is driven by a widespread change in consumer behaviour. The ‘death of the high street’ is often attributed to the rise in online shopping and most of us are guilty of indulging in the convenience of a cheeky Amazon purchase, even when we can’t stand the thought of lining Bezos’ pockets any further. But we all still prefer to buy from independent shops when we can. I’ve referred, in a previous post, to the rise of big businesses virtue-signalling their own support of smaller enterprises. In fact, even Amazon’s homepage would have you think they’re supporting (rather than squeezing out) small business sellers on its platform.
One of the genuinely surprising data sets from LDC’s report relates to independent business survival rates. I want to reproduce it here in all its glory, because it demonstrates why indies are increasingly valuable in the CRE market as corporate covenants drop into the gutter:
As it turns out, independent businesses are just as (if not more) robust than their corporate counterparts. Coupled with the overwhelming consumer trend, over the past 10 years or so, with a 2018 study showing that more than 50% of shoppers prefer to shop locally and independently.
As this trend continues, it’s incumbent upon landlords and their agents to ensure that smaller businesses have equal access to commercial property across the UK. But this is easier said than done, with many smaller operators slowing down the transactional process due to inexperience or indecision.
This is exactly why we’ve built Qualifyr. Our automatic screening system puts detailed tenant information at your fingertips – from every single property enquiry. It doesn’t matter whether you’re marketing properties online, offline, or taking enquiries mostly by phone – Qualifyr will save you more than 20 hours per month per property you’re marketing.
The system takes less than 30 minutes to set up and is free for the first 30 days – so what’s stopping you? Get in touch today for a full demo.