Briefing: a sticky summer for retail

A mixed outlook for retail is creating a “sticky” summer for the sector, according to the Colliers International Midsummer Retail Report. Vacancy levels remain stubbornly high and retailer demand low, with national vacancy rates at nearly 15% and regional rental growth slowing. Colliers’ head of retail, Mark Phillipson, said: “An overprovision of shopping and obsolescent units in towns and cities across the UK is creating ‘sticky’ space – shops that have little prospect of letting. “With more conservative expansion plans, retailers will only take the right space in the right place. This is underlined by the fact we are now seeing new shopping development which will find occupiers while swathes of existing stock remain empty.” However, a warm front created by cheap debt finance and growing international interest is leading to a record year for investment, with the £2.8bn spent in the year to date by overseas buyers expected to rise to £5bn by the end of the year. With loan-to value ratios on debt now commonly available at around 70%, Colliers expects yields to harden by another 40bps for shopping centres, 32bps for shops and 26bps for retail warehouses by the end of the year. Rental forecast: 2015-2019 annual growth Item % growth Central London shops 4.8 Shops (excl London) 1.4 Shopping centres 1.3 Retail warehouses 1.3 Supermarkets –0.2 International: Investment into UK retail sector Year Investment (£bn) 2013 4.3 2014 4.6 2015 5 % annual prime rental growth to May 2015 Region % annual prime rental growth Scotland 0 North East –0.4 Yorks & Humber 0.4 North West –0.1 Eastern 0.2 East Mids 0 West Mids –4 Wales 0 Outer London 5.1 Central London 14.9 South West 0.3 South East –0.2 Vacancy rates: worst performers-key locations Location Vacancy rate High Wycombe 18.2 Rotherham 17.1 Northampton 17.1 Dundee 16.2 Liverpool 14.9 Average 14.7 Bournemouth 14.7 Plymouth 14.3 Worcester 12.9 Cardiff 12.7 Ilford 9.5 Oxford Street 1.2