New research forecasts vacancy rates on British high streets could hit 50% by 2015 - 08/02/2012

A report from the Local Data Company has signalled that British high streets are in disarray, with many shops remaining vacant and boarded up.

“A wave of insolvencies in the UK retail sector pushed average high street vacancy rates up to 14.5 per cent in January” stated the Financial Times in its review of the Annual Shop Vacancy Report.

The report finds that high streets in Northern cities have been hit particularly hard, with vacancy rates increasing 20 per cent in the north-west and 18 per cent in the north-east – around the same level currently recorded in Athens, the debt ridden Greek capital.

The average shop vacancy rate has increased by over 11 per cent in the past four years, from just 3 per cent in 2008, and is set to rise further as retailers struggle to cope with poor trading conditions and a lack of affordable lending.

Some fear shop vacancy rates will be propelled higher in the near future if KPMG fails to find a buyer for clothing chain, Peacocks, which went into a pre-pack administration last month, with over £240m worth of debt. Peacocks is the largest retailer to face liquidation since the demise of Woolworths in 2009.

Other big retailers are fairing no better it seems. Music store, HMV – which also owns Waterstones - plans to close 60 of its stores throughout 2012, approximately “10% of the groups UK high street presence” reports the BBC.

“Following the 2008 financial crisis, a number of retailers were patched up and sent back to the battlefield…their success very much depended on the market coming back and it hasn’t”, said Adam Gallagher, partner in the restructuring and insolvency team at Freshfields. Mr Gallagher warned, “ When trade has deteriorated, retail businesses are left with a much narrower range of restructuring options”.

Separate research conducted by Jones Lang LaSalle, the property consultant, warns that British high street vacancy rates could hit 50 per cent in 2015, as half of all Britain's high street leases come to an end within the next 3 years. The research forecast that vacancy rates will jump significantly as large retailers take the opportunity to “walk away” from rental agreements, slashing their store portfolios and rent bills.

Posted by Miles Pritchard

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