Global property company Colliers International’s 17th Midsummer Retail Report, has painted an improving picture for high streets, forecasting that the next seven years will see a gradual recovery to the peak level of 2006. But how will this happen?
by Tom Johnston
Colliers International’s Is the High Street dead? report asks a fundamental question about the future of our high streets. The answer is no, they’re not dead but we’re at a critical stage and they need to be reinvented, and not just for retail.
The next few years will determine the future of our high streets and we urgently need to create the right environment, which will allow these areas to find their new place in the community. For too long we’ve taken the heart out of these communities and as offices, schools, local government and retailers have dispersed, people no longer have a reason to come back.
By providing a framework conducive to the rebuilding of the hearts of our communities, we can create affordable housing, family homes, leisure facilities, retail and other core services, such as medical and dental practices, that will create this momentum.
However, this can only be achieved through a level-headed review of recent damaging changes to non-domestic rates policy, alongside a more flexible approach to planning. In particular, planning authorities must support a greater mix of uses. Without such moves and other innovative ideas, such as free parking weekends and compulsory purchase orders to kick-start such regeneration, we’re unlikely to see any significant inroads being made to restore our town centres.
We also predict that the recovery in Scotland’s retail will be selective, with high streets facing increasing competition from larger prime retail malls. However, we predict that there will be a fall in the number of empty shops, from the current level of 12% of total floor space to about 7% by 2020.
Vacancy rates are beginning to plateau and coupled with a slow-down in corporate failures, we expect a less negative impact on the high street than in recent years. Our research also suggests internet retailing will be flatlining at 20% of all non-food sales by 2020. As a result, online sales will no longer be as much of a threat to high street, as successful retailers will by then have aligned their internet and property strategies.
Value and discount retailers are also continuing to expand, with 99p Stores entering the Scottish market, where Poundworld, Discount UK, Poundland, B&M and Home Bargains already have a growing presence.
Looking to specific Scottish cities and Aberdeen continues to buck the trend of the rest of the Scottish market, with a low vacancy rate and keen interest for well-proportioned, prime units. The city continues to thrive on the back of the oil industry, high levels of employment, extensive protected geographical catchment area and, arguably, is the Scottish equivalent to London’s UK role as an ‘economic bubble’.
Dundee, meanwhile, is expected to receive a boost from having recently been short listed as one of the final four for the 2017 UK City of Culture so while vacancy rates across the city are around double those of five years ago, there are no new large developments currently planned in the city centre, this means any new demand generated will be focused on the existing prime stock and we anticipate an improved take-up for the next few years.
Rates will also continue to have a major influence. A move to encourage people back into town centres will fail unless the Scottish Government addresses the growing discrepancy between non-domestic rates and the harsh realities of the property market. The move to postpone the 2015 revaluation by two years means rateable values will remain on pre-recessionary April 2008 rental levels. This decision must be reversed.
Without realistic rateable values, any initiative to bring life back into Scotland’s high streets will turn out to be expensive window dressing. Businesses need the right framework and incentives to safeguard their future viability. The Government has in fact dealt a double blow with its rating policy. Changes to empty rates, which came into effect in April, saw the 50% liability levied on landlords with empty property raised to 90%.
The argument that this decision will force landlords to reduce asking rents and stimulate the regeneration of Scotland’s high streets is fundamentally flawed and based on and incorrect assumption. Property is driven by economics, namely supply and demand.
Landlords have since the start of this current economic crisis reduced asking rents substantially but the harsh reality is that there is no demand. The new regulations will require landlords to spend additional revenue on rates, rather than refurbishing or reconfiguring empty units to make these more suitable for today’s retailers.
