Is High Street shopping now a gloomy experience? By its trading update for the period from 1st January 2019 to 2nd May 2019, Intu group (owner of the Lakeside and Trafford Centre shopping centres), has cut its forecast for rental income, blaming the retail downturn. In February 2019, Intu had said it expected rental income to drop by 1-2%. Now however, Intu has said that like-for-like rental income for the year would fall by between 4-6%.
The Intu trading update says that operational performance in the quarter has been stable. However, it expects “the remainder of 2019 to be challenging due to a higher than expected level of Company Voluntary Arrangements (where a company can use an insolvency practitioner to pay creditors over a fixed period) and a slowdown in new lettings as tenants delay their decisions due the uncertainties in the current political and retail environments”. Stores are struggling to pay rent and are trying to restructure to meet consumer demand. For example (from BBC commentary published on 3rd May), “new types of tenants paying higher and long-term rents, such as Metro Bank opening up in Manchester Arndale, and the introduction of a “Market Halls” food court at Lakeside featuring food and drink from smaller independent businesses”.
Restructuring Plans
Sadly, big high street names like WH Smith, House of Fraser, HMV, Debenhams and Marks & Spencer have all suffered over the last 24 months and are looking at restructuring plans to remain lean and nimble both on the high street and on-line. Debenhams reported results for the 26 weeks to March 2019 and said that sales at its UK stores fell 7.4%; which it blamed on fewer shoppers heading to the high street
A report in November 2018 by accountancy firm PwC found that about 14 shops were closing every day; and that High Streets are facing the toughest trading climate in five years. PwC reported a net 1,123 stores disappeared from Britain’s top 500 High Streets in the first six months of 2018; with that trend evidently continuing. Credit Connect, the credit and insolvency news service says that “conversely, overcapacity and a growing shopper preference for in-home leisure is demonstrated by the net loss of 340 restaurant, catering and entertainment outlets”.
The Challenge
The slow demise of high street retail shopping is regrettable and hits our commercial landlords directly in the pocket. The challenge is to try and bring back interest to the high street, but how? Credit Connect says that store categories experiencing the greatest net growth tend to be small chains; such as booksellers, ice-cream parlours, stationers and coffee shops. Large supermarkets also experienced some net growth.
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