Knight Frank's high street retail ranking - where's hot, where's not?
Where next when investing in high street retail? Bury St Edmunds, Basingstoke and Watford. Three towns that wouldn’t necessarily be top-of-mind as hotspots of retailing excellence. But all three rank in the Top 30 in Knight Frank’s *High Street Investment Ranking of 200 locations across the UK. With strong fundamentals, the investment case for each is a decent one.
*Knight Frank’s Retail Ranking assesses the relativities of retail property investment opportunity across 200 UK centres.
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Historic centres – the benefits of supply constraints?
Topping our ranking, Cambridge scores highly across the board, not just in obvious areas such as tourist spend, but also in more fundamental aspects such as population growth, spend growth and rental performance (both historic and forecast).
Its only weak points are very high online spend locally and relatively high OOT competition. By implication, not all spend in the wider catchment may actually gravitate to the city centre itself.
Historic, picturesque and tourist destinations feature prominently in the upper echelons of the Ranking – Bath (2nd), Canterbury (10th=), Brighton (10th=), Edinburgh (12th=), York (24th), Windsor (25th), Harrogate (27th), Salisbury (28th) and Stratford-upon-Avon (44th) all rank in the Top 50. This is despite no upweighting being applied to tourist spend and the relative aesthetics of the centres not being factored into the ranking in any explicit way.
As a general rule, retail property investors do continue to favour historic locations that present well. Often, this judgement is subjective and there is a danger of them effectively merely judging a book by its cover, so to speak.
But our Ranking would suggest that beneath the pleasing aesthetics of many centres, there lie strong fundamentals. Positive sentiment towards historic centres may actually be justified.
Are historic centres the epitome of retail health? Not necessarily, and even as our top ranking centre, Cambridge is not without major operational shortcomings as a retail destination. Many historic centres suffer from under-supply and a lack of modern retail stock, compounded by poor accessibility and limited car parking.
Retailers often pay very full rents to occupy dated, compromised and under-spaced units. In effect, they are often strong high street investment markets by default, rather than by design.
Affluent market towns – more than a cliché?
‘Affluent market towns’ is something of a lazy fall-back to the question of which centres offer the greatest investment potential. But our Ranking does validate the cliché.
The ‘usual suspects’ – Guildford, Chichester, Winchester, Canterbury, Cheltenham, Richmond, Tunbridge Wells, St Albans – are all in the upper reaches of our Ranking, as are slightly under-the-radar towns of a similar ilk such as Chelmsford, Bury St Edmunds, Lincoln and Bishops Stortford.
Above: Guildford high street
A number of the historic centres (e.g. Canterbury, Harrogate, Windsor, Salisbury) effectively tick both the tourist and affluent market town boxes.
In our opinion, catchment affluence can be an over-rated consideration in property investment decisions. Invariably, would-be investors seek comfort from the knowledge that the local population is rich and of a certain social standing.
However, as we have argued in the past, affluence can be a false friend in retailing, in that consumers with the most money are not necessarily those that have the highest propensity to spend it. An affluent catchment by no means guarantees a prospering retail centre.
The high-ranking affluent market towns have more in their favour than just a well-heeled catchment. Taking Guildford and Chichester as leading examples, both have impressive fundamentals across the piece – solid population growth, very strong spend metrics (total/per capita/supply-expenditure) and buoyant occupier dynamics (provision/mix/F&B/demand/ rental performance).
If there are weaknesses, these tend to be on the competition side, more so from high online spend locally, than from other centres. Retail warehousing competition is not unduly onerous in either Guildford or Chichester, but is marginally stronger in the former.
Affluent market towns offer far more than affluence – they are often a virtuous circle of strong fundamentals, good retail/leisure supply in aesthetically-pleasing environments and vibrant occupier markets. There is investment rhyme and reason.
At the same time, don’t always judge a book by its cover.