High street shop closure rate slows
As the pandemic continues to hit business, over 8,700 chain stores disappeared from retail locations in the first six months of 2021.
In total, 3,488 shops opened, compared to 8,739 closures, creating a net decline of 5,251, according to PwC research compiled by the Local Data Company (LDC).
However, there was some reprieve for both retailers and leisure operators, with the number of closures falling faster than the number of openings. As a result, the overall net closure rate is 750 lower than it was at the same point last year, despite some high profile administrations of high street fashion and department stores in early 2021.
Government support, in particular extended furlough and business rates relief until June 2021, have enabled operators to stay in business, while a rent moratorium has prevented landlords from evicting operators due to non-payment of rent or arrears.
These measures have allowed stores to continue trading even where sites have been particularly hard hit by successive lockdowns. Meanwhile, as spending intentions return to pre-pandemic levels, pent-up demand as lockdown measures eased has converted into better-than-expected retail sales in the first full months of trading.
Despite the slowdown in net closures the flight from cities continues to contribute to the decline in multiple stores, with city centres now faring worse than commuter towns and villages.
Footfall in cities is yet to recover to pre-pandemic levels as more people work from home and in the longer term move towards a hybrid working model.
In London, the City and West End is declining faster than suburban areas which are supported by those working from home visiting their local high streets. London has gone from being the best performing region in 2016 (-0.9%) to the worst in 2020 and 2021 (-2.9%).
Regional performance has also reflected the higher number of closures in cities. For example, the south east and East Anglia have been relatively protected, and have been among the most resilient regions in the past two years, as commuters have stayed close to home.
The type of location continues to matter above all else across all regions. Retail parks have seen a smaller number of net closures (634), compared to high streets (3,643) and shopping centres (1,464).
Retail parks have fared better, with many anchored by grocery, DIY and home furnishings retailers, categories that have outperformed others since the start of the pandemic.
Lisa Hooker, consumer markets lead at PwC, said: ‘Government support has proved to be the lifeline for many to weather the storm and survive the pandemic. The fate of many operators has also been helped by resilience in consumer spending, including investment in the home through lockdown and using enforced lockdowns savings for ‘revenge spending’ when possible.
‘The next six months will be a make or break for many chains, particularly with the reinstatement of full business rates for all but the smallest operators, the winding-down of furlough support and agreement yet to be reached between many operators and landlords on rent arrears.
‘But the good news is that there are some green shoots of optimism. Consumers still want a physical shopping experience and a number of chain stores and restaurants are opening. There is opportunity for operators who can be nimble, taking advantage of the current situation to either open new stores or to move stores to better locations.’
Leisure dominates growth, with takeaway chains buoyed by a rise in delivery as well as walk-in demand. Smaller chains and franchise operators, such as cake shops and amusement arcades, have also been able to take advantage of lower rents and vacant units to expand their footprints.
The shift to online, accelerated by consumer behaviour during Covid lockdowns, continues to be the biggest common denominator for closures in both retail and services.
Hooker added: ‘In the uncertain times ahead it’s likely that not all shopping locations will survive in the same form, so investors will be considering how to repurpose the spaces to ensure profitability. The current overcapacity of retail space needs to be addressed and effective changes will require the cooperation of government, landlords and operators.’
Lucy Stainton, head of retail and strategic partnerships at The Local Data Company said: ‘Despite LDC’s latest research showing that total vacancy had reached an all-time high of 14.5% at the end of H1 2021, there are promising signs that the speed of the decline we were tracking across the worst of the pandemic is slowing.
‘The volume of empty units is at a record high with no sign that the demand will ever be there to meet the supply. In fact, the data for H1 2021 indicates that openings were at the lowest they have been for six years.’