Britain's meanest high streets

Published 28th Feb 2009

The retail implosion is hitting hardest in provincial towns. Zoe Wood looks at the relentless unravelling of classic chains


"This town, is coming like a ghost town ..." If the retail sector currently had a soundtrack, "Ghost Town" by the Specials would certainly fit the mood after a week in which another 300 stores and close to 3,500 jobs landed on the high-street scrapheap.

The Specials song, which topped the charts in 1981, reflected the Coventry band's fears that the Thatcher government was creating unemployment blackspots in the regions. And as the retail dominoes fall, the recession vice is gripping some of Britain's high streets harder than others.

The harsh reality was brought home last week as the financial troubles of Aim-listed Stylo culminated in the closure of 220 Barratts stores and the loss of 2,500 staff jobs, in a workforce that was 85% female. Bradford-based Barratts is the kind of retail name embedded in the consciousness of those who grew up outside London, where retailers such as Woolworths were the highlight of the local parade - parades that now look increasingly desolate.

"For some time, parts of the country, such as Scotland and the West Midlands, have been struggling," says Stylo chief executive Michael Ziff. "A lot of small towns are going to struggle over the next few years as people move away. The south-east has been less affected, but it's starting to feel it now."

Retail analyst Experian expects one in 10 UK shops to lie empty by the end of this month, as closures announced by administrators working for high street chains Barratts, Zavvi and JJB Sports are added to a list swollen by the wreckage of high-street casualties, such as Woolworths, Adams and Card Warehouse. They also expect the picture to get worse before it gets better, predicting the number of voids will reach 15% by the end of the year.
Empty shops table

Experian calculates those hardest hit so far are the Welsh towns of Holyhead and Milford Haven, where 39% of retail space is predicted to lie vacant by the end of February. They are followed by the London suburb of Beckton, with 37%, and Chelmsley Wood in the West Midlands, with 36%. The analysis did not include retail parks, which in some cases have vacancy rates of more than 50% owing to the demise of chains such as MFI, Land of Leather and Ilva. "Often these towns have lacked retail investment for some time," says Jonathan de Mello, director of property at Experian. "This situation can only get worse in the current climate."

And as recession deepens, administrators are finding buyers for a dwindling number of stores, as the glut of property available extinguishes the value of some leases. Zavvi's administrator secured buyers for 27 of its 125 stores, while around a quarter of the 800 Woolworths stores has been sold so far.

"There are pockets of affluence in big provincial cities, such as Leeds and Manchester, that are not getting the same level of voids," says Chris Blair, Savills' head of national retail. "But the further you go from London, the worse it gets."

Stylo's collapse brought simmering tensions between the retail and property sectors to the surface, as the two factions clashed over the group's future. Stylo's adviser, KPMG, had proposed a series of company voluntary arrangements (CVAs) as an alternative to putting the entire group into administration, as eventually happened. That would have set new rents at a lower base, in this case calculated as 7% of turnover. But quoted landlords, including Hammerson, as well as institutional investors, such as Prupin, shot the idea down.

The property lobby argued that CVAs could set a precedent and other retailers might try and use them to exit loss-making stores. But 220 sets of Stylo keys are winging their way back to their owners, who will be liable for business rates, even though the premises are empty.

Landlords are "out of touch", according to Ziff. "Some have got their acts together but others seem to prefer to sit in Grosvenor Street [in London's Mayfair], rather than visit tenants in less attractive parts of the country." For generations, the Stylo shoe business has been in the Ziff family, who have struck a deal with administrator Deloitte to buy back 160 stores, as well as its concession business, safeguarding 3,000 jobs.

Upward-only rent reviews resulted in strong gains for landlords during the boom years and retailers had hoped a rising tide of voids would force them to agree more generous terms. "Landlords are getting their just deserts as there are a lot of empty units, but we are strapped to a rocket," says one retailer. "Because of upward-only rent reviews, supply and demand is not dictating price."

But both camps are under pressure. Economists at Capital Economics predict consumer spending will contract by 3.5% this year and by another 1.5% in 2010. Of the £288bn spent in 2008, more than half - £163.6bn - is classed as "indulgence" and vulnerable in a downturn. "The priority for most consumers will be to cut high levels of debt and increase conventional savings," says Ed Stansfield, property economist at Capital Economics.

Meanwhile, five of the UK's six biggest quoted property companies - including Land Securities, Hammerson and British Land - are embarking on rights issues or considering them.

As he presided over Land Securities' heavily discounted £755m rights issue last week, chief executive Francis Salway said the 2008 decline in commercial property values was "the worst in 80 years". Capital Economics expects commercial property capital values to fall by another 30% this year, meaning they are likely to decline 55% from the June 2007 peak as rents are pulled down by grim market conditions. Stansfield estimates rents will fall by 7% this year, and a further 10% in 2010.

The state of suburban and small-town high streets cannot be blamed entirely on market conditions. Many had been failing for years, as more people began shopping in supermarkets and spending their leisure time trawling malls in nearby towns or, better still, the internet.

Catherine Tobiasinsky, head of retail at property consultant EC Harris, says some retailers are being forced to confront problems of their own making after years of "lazy" asset management. "Retailers were not minded to weed out unprofitable stores at a time when they could have found buyers. Many of the troubled chains were formed by acquisitions and there was no real debate around does all this add up?" Zavvi, for example, was the bastard child of Our Price and Virgin Megastores, with the big Tower Records store in London thrown in.

However, Tobiasinsky says the level of disposals achieved by administrators does not necessarily reflect the true appetite for the stores, with some buyers choosing to wait, then approach landlords directly. "There is a candid game of negotiation being played as the amount of space coming to the market is unprecedented," she says, citing one retailer that estimates it saved £1m by dealing direct with Woolworths' landlords.

The plight of Britain's older high streets has been compounded by unprecedented retail expansion, with a staggering 88m sq ft of new stores added over the past 20 years, including gilded shopping centres such as Westfield in London's Shepherd's Bush and Cabot Circus in Bristol, which both opened last year. "There needs to be a period of five to 10 years with no new developments," says Ziff. As cash-strapped property groups batten down the hatches, he may get his wish.
Pop-up power: the rise of trendy temporary stores

Harem pants, shoulder pads, platform shoes... trends come and go, but even in the fickle world of fashion consumers didn't usually expect their clothing stores to do the same.

All that has changed. Be it bars, restaurants or shops, "pop-up" or temporary venues are increasingly being used to reach customers guerrilla-style - and, crucially, without breaking the bank. They typically spring up in unoccupied premises, taking leases of between one and three months, with the rent dictated by market conditions. Fashion label PPQ has just opened a pop-up store in the Burlington Arcade in Mayfair to coincide with London Fashion Week, which started on Friday.

"Pop-ups are a laboratory for creativity," says Craig Robins, chief executive of American property firm Dacra, who was in London last week to recruit brands for his retail developments, which include the Miami Design District. "Some brands might not be ready to open a store and pop-ups offer a lot of flexibility."

In recent months London restaurateurs such as Mourad Mazouz have led the way by opening temporary venues. Mazouz, the entrepreneur behind high-end establishments such as Momo and Sketch, is currently hosting The Double Club, a pop-up restaurant-cum-disco in a Victorian warehouse in Islington.

"London's nightlife culture is fairly transient; a new bar or restaurant opens, everyone is curious to try it, then often people move on to the next new thing," said Mazouz in a recent interview. "The pop-up is in keeping with this. It's a talking point and offers something fresh and immediate."

Innovative Japanese retailer Comme des Garçons first experimented with pop-ups in 2004. Word is spread by the media and social networking sites and the aim is to close before the novelty wears off. Such was the success of Comme des Garçons' temporary store in London's Dover Street Market, it became, ironically, a permanent fixture. Older pop-ups are listed on its website as "disappeared".

"For brands, everything is about experience," says Richard Scott, director of consumer and lifestyle at the PR agency Relative MO, who has worked on pop-up restaurants by Pablo Flack and David Waddington, the owners of Bistrotheque. A pop-up is a good way for a brand to create an "experience" that it can be associated with, he believes - and it needn't be too expensive. "It requires a budget - but that goes when it pops down."

Selfridges regularly hosts pop-ups and last year, Sony's Bravia television division caused a stir with The Colour Rooms, a temporary venue in a former railway arch in London's trendy Shoreditch district. The venue boasted a private screening room, stage and bar and during a five-month run hosted events for Currys owner DSG International, and clothing lines Uniqlo and New Look.

While the stated aim of these ultra-cool projects is to express high-minded creative ideals, in reality they also serve a commercial purpose, especially in a downturn that is hitting the leisure sector hard. They match the needs of retailers and landlords, with the former loath to commit to new leases and the latter in need of high-calibre tenants.

Source: ' Guardian '

View All Latest Articles