Sharp slowdown in shop openings in Q2 2017

The second quarter of 2017 saw the number of shop openings reduce by 84% compared with Q2 2016, according to LDC’s latest bi-annual Retail and Leisure Trends Report. The slowdown in openings resulted in a net loss of 62 shops in the second quarter versus a net increase of 428 in the first quarter of the year. The net difference between these two quarters of -497 is the biggest fall between any two consecutive quarters in the past five years. The number of openings reduced from the 2012 quarterly average of 4,006 to 2,995 (-25%) in Q2 2017. The openings and closures activity was reflected in the shop vacancy rate that started to rise in the second quarter of 2017. It rose in both May (+0.1%) and June (+0.1%) to 12.2%. This, however, is still significantly below the 2012 peak of 14.6%. New vacancies (less than a year vacant) also increased from 3.3% of the total number of shops to 3.7% by the half-year point. The national shop (retail) vacancy rate stands at 12.2%. The LDC report, which looks at the first half of 2017, also compares recent results with those over the past five years. Other key findings of the report: ■ retail parks have seen more net openings than high streets or shopping centres but are still home to just 2.5% of all stores (units); ■ high streets still house more than half of all retail and leisure outlets (50.5%); ■ comparison goods retail (non-food) was the only category in net decline in H1 2017; ■ independents generated 89% of the net growth in shop numbers since H1 2013; ■ barbers and beauty salons topped the growth tables in H1 2017; ■ estate agents entered the net closures’ top 10 at number six in the first half of 2017, closing a net -91 units. Over five years they had increased in number by a net +134. Bank branches had headed the service retail closures table for the past half decade, but in the six months of H1 2017 estate agents took top position instead; ■ convenience (food) retailers topped the retail fascia growth table in H1 2017, taking seven of the top 10 positions; ■ the North West saw the biggest increase in the number of occupied shops in H1 2017. Greater London and the East of England saw the smallest increase; ■ central London lost more shops, net, than anywhere else in Great Britain; ■ vacancy in Wales has fallen faster than in either Scotland or England, but still remains higher than both of these nations; ■ greater London has half the vacancy rate of the North West; ■ three towns, all in the South East, had zero vacancy by the mid-point in 2017: Barking Road West, Dagenham and Erith; ■ the three towns with the highest vacancy rate are the same as at the end of 2016 – Burslem, Dewsbury and Newport, Monmouthshire – and the vacancy rates of all three have increased.; Matthew Hopkinson of LDC said: “There was a striking turnaround in the second quarter of 2017, especially when compared with the trends of 2016, in the number of shop openings. The impact of Brexit is clear with Q2 showing a net loss of nearly 500 shops versus positive growth in the previous quarter. “Not only has the trend turned negative with more closures than openings but the volume of activity has also dropped by 25%. While the numbers, relative to the total number of shops, are currently small, the vacancy rate in Q2 started to rise and is likely to continue to do so if the current uncertainty continues. “The role of physical retailing continues to evolve and the place that a shop has in the overall buying cycle varies from brand to brand and sector to sector. Stores continue to perform a vital role in the purchase cycle and consumer journey but the key questions remain around how many shops you need, what kind of format and in which locations. “With rising costs everywhere for retailers, margins are being squeezed and therefore understanding these micro- to macro-location trends is fundamental for retailer success. Shorter lease lengths and more proactive management by landlords are likely to increase the number of openings and closures of stores and thus more fluidity in the UK’s high streets. The changes in the first half of 2017 are a clear indicator of the uncertainty that permeates across all aspects of the UK economy.” To send feedback, e-mail amber.rolt@egi.co.uk or tweet @AmberRoltEG or @estatesgazette