Real threat to the high street

Belfast Telegraph - Business Telegraph - - Front Page - Byan­drewwebb, di­rec­tor­bak­er­tilly­mooney­moore

City cen­tre is in cri­sis, says an­drew webb, and we need an ur­gent re­think

Ear­lier this year, I wrote that we had reached a point of real con­cern for re­tail. Un­for­tu­nately, avail­able ev­i­dence sug­gests I now go fur­ther than that.

The high street is in cri­sis and we need an ur­gent re­think about what our city and town cen­tres are used for.

The fire at Pri­mark’s Bank Build­ings store, which has closed off a main thor­ough­fare, has brought con­sid­er­able hard­ship to the af­fected traders in Belfast city cen­tre, and it is right that any pos­si­ble as­sis­tance should be made avail­able to sup­port the traders to come through this dif­fi­cult pe­riod.

How­ever, the shock to the city’s re­tail core can­not be used as the rea­son for ev­ery sin­gle shop clo­sure from this point forth, at the ex­pense of an hon­est ap­praisal of the stark re­al­ity.

There is an ex­is­ten­tial threat to the high street from a whole host of di­rec­tions: the shift to on­line re­tail; a con­trac­tion in con­sumer de­mand for re­tail mer­chan­dise in favour of travel, eat­ing out and what we are in­creas­ingly re­fer­ring to as ‘ex­pe­ri­ence’; a busi­ness rates sys­tem that is in­creas­ingly un­fit for pur­pose; and a legacy of re­tail­ers lock­ing them­selves into long-term leases on prop­er­ties that they can no longer af­ford.

Across the UK, 2018 has proved to be one of the most chal­leng­ing years in the re­tail sec­tor. Ad­min­is­tra­tions of Toys R Us, House of Fraser and Maplin to­gether with CVAS car­ried out by New Look, Car­petright and Mothercare are painful ev­i­dence of the chal­lenges fac­ing re­tail­ers.

The Cen­tre for Re­tail Re­search paints a bleak pic­ture. Since 2008, they note that the pace of de­cline has ac­cel­er­ated.

At the mid-point of this year they had iden­ti­fied 409 large and medium-sized re­tail­ers that had gone into ad­min­is­tra­tion since 2008.

For con­text, across the UK this has im­pacted 280,000 em­ploy­ees. There are now just un­der one in 10 re­tail em­ploy­ees that have been im­pacted by ad­min­is­tra­tion in the pre­vi­ous 10 years. This was one in 50 when last as­sessed a decade ago.

The Cen­tre for Re­tail Re­search ex­pects 10,000 stores to have closed across the UK by the end of 2018. That would re­sult in al­most a fifth of stores clos­ing since 2012.

In No­vem­ber 2008, 6% of to­tal re­tail sales were on­line — £1 in ev­ery £16 or so. To­day that has risen to stand at £1 in ev­ery re­tail £5 be­ing spent on­line. This has ob­vi­ously im­pacted on cer­tain ar­eas of re­tail more than oth­ers.

Food and gro­cery sales on­line are around 6% but grow­ing while non-food sales are 26.5% — higher than ever. These trends to­wards on­line have placed great pressure on rental val­ues which in turn is im­pact­ing upon cap­i­tal val­ues and gen­eral in­vestor de­mand for the sec­tor.

As far as Belfast is con­cerned, the ex­perts in prop­erty at Sav­ills tell me that the chal­lenges fac­ing the re­tail mar­ket are sim­i­lar to many other UK cities.

They do, how­ever, note some chinks of light in an oth­er­wise bleak scene.

In the last year or so, even with the po­lit­i­cal un­cer­tainty in North­ern Ire­land, a num­ber of new re­tail­ers se­cured out­lets here for the first time: Nep­tune, Smiggle, Pretty Green and Kukoon, to name a few.

Fur­ther­more, Su­perdry, Sostrene Grene, Skech­ers, The Range, EZ Liv­ing, Tres­pass, Greggs, Spec­savers and Star­bucks all ac­quired new stores lo­cally.

The five-year fore­casts from the Cen­tre for Re­tail Re­search pre­dict that more shop­ping will be done on­line, sug­gest­ing that one in ev­ery four re­tail pounds will be on­line.

Non-food on­line re­tail is ex­pected to grow to be­come a third of all non-food re­tail trans­ac­tions. This will prompt fur­ther store clo­sures and job losses.

Their re­search fears that al­most one in five re­tail jobs will be lost by 2022. In North­ern Ire­land that will be about 25,000 jobs — a po­ten­tially dev­as­tat­ing blow.

The re­tail prop­erty mar­ket will con­tinue to evolve as tech­nol­ogy plays an ever-in­creas­ing role, and there will con­tinue to be both win­ners and losers.

Sav­ills note that they are still see­ing many oc­cu­piers seek­ing new space in var­i­ous lo­ca­tions lo­cally and ev­ery year there are re­tail­ers from both the UK and Ire­land con­sid­er­ing NI as a lo­ca­tion for the first time. There is also an in­creas­ing trend across towns and cities for al­ter­na­tives to re­tail (such as leisure, en­ter­tain­ment and the arts) to seek space in tra­di­tional re­tail cores.

Res­i­den­tial and com­mer­cial of­fice space are also ex­pected to drive city cen­tre growth over time.

The fire at Bank Build­ings dev­as­tated the city cen­tre, with plum­met­ing foot­fall prompt­ing an emer­gency re­sponse. The news that Pri­mark is to re-open is most wel­come but that doesn’t sig­nal any end to the crises fac­ing the city cen­tre.

Per­haps it does sig­nal the start of a re­newed fo­cus on re-craft­ing our city cen­tre for the fu­ture, and per­haps the clo­sure of sig­nif­i­cant parts of our city cen­tre will give us all a jolt as to what a se­vere eco­nomic de­cline would look like if it took hold per­ma­nently. In next week’s Econ­omy Watch, we hear from EY Ire­land chief econ­o­mist Neil Gib­son

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