It may be the end of the road for such retail stalwarts as Woolworths and Adams to name but a few, but talk of High Street “ghost towns” is way off the mark, according to a Midland property recovery expert.
The festive period at the end of 2008 saw many retailers destroy their margins by using massive discounts to tempt hard-pressed consumers to buy.
Some observers believe the result will be swathes of empty space on Britain’s High Streets, as cash-strapped retailers then go under in the first half of 2009.
However, Mark Shelley, head of property recovery at King Sturge in Birmingham, believes the pundits are mistakenly looking backward and recalling what happened in previous recessions.
“It’s often said that bad generals are always fighting the previous war, and for me this is happening now, in some sections of the retail property sector,” he said.
“The phrase ‘Ghost Town Britain’ was coined to encapsulate what happened, when consumer-spending slowdowns led to huge volumes of empty floorspace, but the ‘boom-bust-disappear’ business cycle is rare nowadays.”
Equally, Shelley is anxious not to be seen as an agent trying to talk up the market. ”The outlook is ominous for retailers who have agreed relatively long leases, especially those with fixed and ‘upward-only’ rent reviews, whose finances are being squeezed, and I am sure we will see more profit warnings, and announcements of deteriorating performance,” he admitted.
“However, the official data from the British Retail Consortium and the Office of National Statistics shows a much more benign trading picture than might be thought from some of the hysterical media coverage.”
The gloom-mongers have pointed to the collapse of such established retailers as Allders, C&A, Courts, Littlewoods and Woolworth, as proof that desperate times lie ahead. But Shelley sees the demise of such historic brands differently.
“The first four stalwarts alone had around 400 years of trading experience, so their spectacular fall from grace certainly proves that nothing is sacred,” he said.
“However, to use their collapse to predict a return of ‘Ghost Town Britain’ is absurd. Collectively, they occupied some 8.8 million sq ft of space across the best part of 400 stores, but is this space now lying idle?
“Of course it isn’t. It has been absorbed back into the market, and taken up by either relative newcomers with major expansion programmes, such as Primark and TK Maxx, or established retailers with changing floorspace requirements.”
The King Sturge observer said banks, administrators and property advisers are also much more reluctant to see empty stores on the nation’s High Streets than in previous recessions, and that companies like King Sturge are able to offer a number of “parachutes”, such as short-term lets/licences, redevelopment and reconfiguration options and change of planning use, which will all help to avert the worst case scenario.
“I wouldn’t wish to suggest that there was a cavalier attitude in the 80s and 90s, but there is certainly a much more rigorous approach to business recovery now,” he said. “Even the private equity houses, who were virtually absent in the last recession, are likely to be a key driver during the current slowdown.”
Intriguingly, Shelley also considers that the much-criticised empty rates tax will be a force for good.
“Landlords will naturally be eager to let vacant premises as quickly as possible, and although they will be equally keen to maintain the rental ‘tone’ of their portfolio, I am sure they will look at bringing in temporary tenants to maintain occupancy levels,” he predicted.
“In essence, although there will be losers, and more famous brands will surely be taken to the edge of collapse, the retail sector’s uncanny ability to reinvent itself will mean a far more stable 2009 than many are predicting.”