Real threat to the high street
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