Watching the High Street Retail Sector Decline and Evolve.
As a commercial surveyor practising in a market town, I find it very sad to see the general decline in retailing taking place. Where once there was a hustle and a bustle, the wide pavements are almost devoid of people. It is happening across the United Kingdom, and my local town is not unique in experiencing this decline. I suppose the process for me has been made even more poignant because I have two very close friends who own a shop, and it has been tragic watching them trying to cope with the decline whilst the “friendly” high street commercial banks apply the brakes, as they try and make an exit from lending to this sector of business.
I am sure that most people will have read the Mary Portas retail review and understood the 28 recommendations made by her to rejuvenate the High Street, they are quite far reaching and have very good original thought incorporated into the basic concept changes. The one thing that is clear however, is that our behaviour as purchasers is changing. And I am just as guilty as the rest. If I look for a specific good, I will look at the internet to see what’s available, and also perhaps more importantly what’s the likely price going to be.
Lets go back a step, the WWW bit of an internet address stands for the World Wide Webb. This is globalisation in its purest form, and one can often see products being from marketed right across the planet. To that extent, perhaps the decline of retailing is not so surprising. There are several disadvantages however, one is that you cannot immediately see the product you are buying physically, there is a time lag with delivery, and if the product turns out to not be what you expected, you have the inconvenience of posting it back to the supplier. There is also the risk of the product being lost in transit, which just adds further complications to the process. Buying off the internet rather takes the impulse out of shopping.
The positives are however that you see a much wider range of goods, price is very competitive, and providing you know exactly what you want, you have the convenience of being able to order the product when you want it, without even leaving your home. What’s more, you don’t even have to leave you home to collect it, a carrier will normally leave the package at your front door.
So what do we do with the High Street? If retailing is in decline, it has to be allowed to evolve back into something useful. The Managing Director of Majestic Wines has suggested that the High Street should be allowed to decline, but I would argue that he would say that, as a lot of his stores are based in out of town locations.
One thing is clear, High Street rental values will fall as demand eases. This reduction in value will be exacerbated by the void rate regime, because once a non listed shop becomes empty for more than three months, the Government charges full rates on the property, an effective tax on capital. If the values fall so low, then, subject to planning, alternative uses start to look more economically attractive to Landlords, the key one being residential, particularly for poor secondary and tertiary locations.
Whilst this change occurs, there will be a very sharp correction in property values, because Surveyors still look to value property on rental income streams. They assess risk, and determine value based on comparable property transactions. This process by its very nature will end up becoming a spiral of decline. While this goes on, the clearing banks will become increasingly nervous about lending capital to new entrants into the market, again providing a further knock on effect to property’s decline. In the mean time, many pension funds holding property will be put under financial pressure, as they realise that the equity to loan ratios fall away, and they receive repayment demands from the banks anxious to recoup their capital without incurring losses.
One of the other big losses to our towns is the loss of community spirit. Seeing old Mrs Jones every Saturday would be a social occasion, five minutes conversation would probably put the world to rights, and if for any reason Mrs Jones wasn’t there, a question would be asked to make sure she was okay. This is the essence of a caring community, every one looks out for their neighbour. Modern communications have made us more contactable, but substantially reduced our need to be in a particular location physically. The iphone with its camera has hastened the process even further, in effect it is a mobile office.
It would appear that Government is going to implement the recommendations of the Portas review as soon as is practicable. During the early part of this month, the Department for Communities and Local Governments plan to launch pilots to establish Portas’s “Champions of Change” ahead of the official response to the review which is due in the spring. It looks like there will be a tender process to allow local groups, including representatives from retailers, councils Landlords and businesses to put themselves forward for the pilots to create a “town team”, which will act in an advisory capacity.
Portas suggests that these teams should focus on and I quote: “making High Streets accessible, attractive and safe and set out a clear vision for their town” influencing the decisions on how their town should develop and evolve over the next few decades. Town teams could have the power to decide the appropriate mix of shops and services for their area. They could actually brand the High Street, and steer its further evolution. It will be essential that the local planning authority work in conjunction with the town team, otherwise it will become a pointless exercise, but in theory it sounds a very good way to re-energise the community with decision making for applications which have such a long term impact on the community if they are determined incorrectly.
My fear is that in many instances in terms of retail on the High Street, it may be too late to shut the stable door if the horse has already bolted, and we will have to adapt what is left before creating the right environment for retail enterprises to return to the High Street. We live in interesting times, and I for one cannot see the pace of change slowing down. Anything we can do as a community to modify this change for the better of the community as a whole must be a good thing, even if it does involve major change on our existing High Streets.
By Tony Rowland. Commercial Partner Timothy Lea & Griffiths www.tlgea.com