The UK high street: dead, diversifying or doomed?
The occupational market has been in decline for some time and there is general acceptance that we are reaching the bottom of yet another cycle. There is, however, a lack of acceptance that the bottom of the market is actually the new norm, at least in some towns.
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Those expecting a bounce back and return to former levels across the country will be sorely disappointed.
The new order
Why? The way we shop has fundamentally changed. The retail environment experienced a perfect storm through 2009/10 as the great economic crash really bit.
But the retail revolution wasn’t driven purely by wider economic malaise. At the same time, consumers have increasingly embraced technology – prompting a seismic change in the way we shop, what we shop for, as well as when and where we shop.
Retailers no longer need to be on every high street in the country and can service the UK market from a smaller number of stores. Established traders have spent the past ten years right-sizing their portfolios, relocating, re-gearing or vacating to reduce overheads, while new retailers have become far more selective in their acquisition programmes.
The days of a whole host of retailers rampaging across the land acquiring 40/50/60 stores a year are gone.
Landlords are vying with each other to attract any retailer in acquisition mode, and offering the deals to secure them.
The high street is far from dead, but it is a very different place than it was ten years ago. Those that understand this will prosper; those that don’t will be left regaling tales of the good old days, as the market moves on and leaves them behind.
Evolving rather than dying
Town centres need to evolve to offer what is demanded from the catchment, not what landlords falsely create with huge incentives and low rents. Not every retail centre needs to offer the multi-channel, high experience, quality offering that the likes of a Westfield scheme embraces.
Retail centres are becoming more compartmentalised, and the faster a centre recognises which compartment it sits in, the more chance it has of survival.
"The high street is far from dead, but it is a very different place than it was ten years ago. Those that understand this will prosper; those that don’t will be left regaling tales of the good old days, as the market moves on and leaves them behind."
Take Manchester as an example. The city centre provides one of the UK’s leading retail and leisure experiences. The prime high street pitches remain incredibly strong and this can be said about our other leading (25 or 50) cities.
However, this is an environment the satellite towns such as Stockport, Ashton-under-Lyne, Bury, Bolton etc. cannot compete with, and never will.
"There can be no ‘one size fits all’ approach. Retail is a very organic thing; it changes with the times and delivers those uses which are demanded by the consumer. "
Add to that the smaller towns in the wider Manchester conurbation of Middleton, Oldham, Stretford, Wythenshawe and so on, and the result is a catchment oversupplied with retail space.
Smaller retail centres need to realise their position in the hierarchy and offer what the consumer wants, which is a convenient place to grab the essentials of everyday life; be that the bank, the hairdresser, the doctor, the travel agent or the supermarket.
If the centre is able to reflect the convenience-based needs of the people that live and work there, the end result is generally a vibrant, sustainable retail location.
Where once we feared the homogenisation of high streets, successful town centres have evolved into very different things.
Today, town centres can offer various options and experiences depending on where you go. Owners with control of multiple holdings are able to influence and manage the mix to deliver a point of difference that will attract the ever more discerning customer.
There can be no ‘one size fits all’ approach. Retail is a very organic thing; it changes with the times and delivers those uses which are demanded by the consumer.
As such, town centres have moved away from the pure shopping experience and food and beverage now plays a key part in any visit to a high street, be that a cup of coffee or a meal.
Consumers today are far more discerning and demand much more from their retail experience.
Far more selective occupier demand
Despite the headwinds the high street faces, there is still activity in the market. But generally speaking, demand is far more selective.
Some established retailers are embracing changing markets. Waterstones is a good example of an ‘old guard’ retailer which has rebased to ensure prosperity going forward. Only a few years ago the business was apparently consigned to history as Amazon took over the world, with books at the very sharpest end of its dominance.
Having retrenched, Waterstones is again on the expansion trail, understanding and responding to the needs and aspirations of customers who love books and the printed word, and are not purely wedded to a digital environment.
Maybe not as many as we would like, but there are still new entrants to the market. Australian stationery retailer Smiggle is probably the best example of an international retailer entering the UK for many years.
Recognising that entering a very crowded established market is not easy, the business has been very selective in its site selection, stuck at it and proved a huge success. It now has over 100 stores trading across the country.
"Some established retailers are embracing changing markets. Waterstones is a good example of an ‘old guard’ retailer which has rebased to ensure prosperity going forward. "
Equally, the high street is not necessarily all about retail. We are seeing more activity from non-traditional retail uses on high streets. MetroBank now occupies a prominent corner of most major high streets in the South East, bucking the trend of portfolio rationalisation of the more traditional retail banks.
We are also seeing branded stores for consumer goods such as Dyson, Kitchen Aid, Tempur and Tesla all opening shops and adding a new element to our high streets.
As much marketing showcases for the brand as a whole than traditional retail outlets, they nevertheless bring a welcome sense of diversity and “fresh blood”.
The final new addition to the high street is perhaps the least expected — the pure play online retailers. Traditionally dubbed high street tormentors that flourish by avoiding the high cost base of operating physical stores, many of the pure-plays are slowly but surely crossing the supposed divide and opening outlets on the high street.
"Smaller retail centres need to realise their position in the hierarchy and offer what the consumer wants, which is a convenient place to grab the essentials of everyday life."
Recent high profile examples include Sofa.com and Missguided. This affirms our underlying belief that the high street and online worlds work hand in hand, rather than in isolation or opposition. Nonetheless there is still a certain irony that high street occupier demand is now coming from the very forces that were supposed to undermine it.
The new norm
The days of long retailer requirements lists across 100+ towns, rampant occupier demand and easy rental growth have gone forever. This is the new reality and there will be no going back to the good old days. But the high street is far from dead.
Above all, the tale of the high street boils down to basic economics: supply is outstripping demand. The ramifications of this are wide, but not necessarily all bad.
Nevertheless, landlords need to wake up and smell the coffee.