As more multichannel retailers look to CVAs to lighten their rent load, new figures suggest that almost 16% of UK shops now lie empty.
Business adviser Duff & Phelps has used a Freedom of Information request to survey local authorities on how many shops stand empty in their areas. The results, it says, should show more accurately than other surveys how many stores are both empty and available for rent.
Duff & Phelps asked 70 UK local authorities to release figures on retail voids in their areas, and 47 replied, providing a sample of 11% of the 418 authorities in the UK. Working from this sample, researchers extrapolated that 50,578 shops, or 15.9% of all UK stores, were empty, an average of 121 empty shops per council. It also concluded that 91% of local authorities were retail landlords in their own right, and so are losing out directly when shops stand empty.
Philip Duffy, managing director, restructuring advisory at Duff & Phelps, said: “The old financial model of the traditional brick and mortar retailer—based on a high street or shopping centre built around them in the post war era—was centred on regular increases in sales and 25-year leases with upward rent reviews only. As a result, it has meant high rents and occupancy costs. This has blown apart as a result of both the discounters and the dramatic uptick in online sales. The remaining question is whether this picture continues throughout 2019 and if so, at what speed?”
The figures come at a time when more retailers are using CVAs (company voluntary agreements) in order to reduce store rents as they look to restructure their businesses at a time when customers are making more of their purchases online.
Duff & Phelps cites Centre for Retail Research figures that suggest 38 businesses went into administration in 2018, with 2,892 stores affected and 43,292 jobs. Others have used CVAs – not always successfully – to avoid failing, and have cut stores at the same time.
Retailers from New Look and Mothercare to House of Fraser and, more recently, Monsoon Accessorize have taken that path. More recently Arcadia has used seven CVAs to avoid administration – but two of those CVAs, relating to Topshop and Topman, have today been challenged by a US property company. But Arcadia Group chief executive Ian Grabiner insists that the CVAs are vital, and described the challenges as “entirely without merit”.
He said: “The CVAs are a vital part of our restructuring, putting the business on a firm financial footing and enabling significant investment as part of our growth plans which will ultimately benefit all our stakeholders. Our group continues to trade as normal and we remain focussed on delivering our turnaround plans.”
Image: InternetRetailing Media/Paul Skeldon