PropList Blog
State of the High Street

Following the recent closure of Toys R Us and Maplin, and other big names such as New Look and House of Fraser shutting stores through a CVA in attempt to revive their businesses, the high street appears publically on its knees.

Whilst many UK town centres have become littered with budget supermarkets and discount stores, even these tenants have taken a hit in recent weeks, with Poundland closing 25 stores after entering administration. Soaring business rates and a downturn in consumer spending has led to the high street’s worst year since 2010.

This does make for bleak reading, and rightfully commands the newspaper column inches that business closures generate. The negative stories have not only outweighed the positive ones, but overshadowed them, and in turn can be slightly accountable for the dragging store opening numbers seen in 2018; but is this actually the final chapter for such an iconic British institute?

According to Savills, real earnings growth is back in positive territory for the first time in over a year, and demand for high street retail investment remains strong – so long as they are prime in terms of location, tenant, and lease length.

Despite the flurry of negative news about high street retailers, investors publically insist that there are still businesses worth putting your money into, particularly those that are “balancing their store offering alongside online shopping”.

Among the businesses tipped were sports retailers JD Sports and Sports Direct, which are attractive due to their consistent revenues. Clothing retailers Next and Ted Baker were also suggested; Next for their quality management and prioritising investors, and Ted Baker for holding back on opening too many stores, maintaining only prime high street locations to ensure a constant flow of its target customers.

Food brands that have their own stores as well as stock in supermarkets, wholesale, and online, such as Hotel Chocolat and Patisserie Valerie, are also favoured by backers.

Although online sales are usually a key part of retail today, Primark is still a solid investment despite its shunning of online sales altogether. Sticking to brick and mortar stores, Primark has a straightforward business model and offers low prices to consumers, which is an attractive proposition for investment.

Some businesses will be benefitting from the failure of others, particularly in the toys and electrical sectors, likely seeing covenants and market shares improving in the wake of Toys R Us and Maplin closures. The various store closures also mean that quality units in more prime locations will be becoming available, which will be alluring to businesses looking to move or expand.

With the prevalence of online shopping in the market today, the question still stands: can the high street survive in the future, when most consumers are of the generation used to having anything they could want delivered to their door? Many seem to believe that the younger generation are all opting for online shopping over going out to brick and mortar stores, but that may not be the case.

According to polling by YouGov and Colliers International, young people are actually big supporters of the high street shopping experience. Over 75% of 18-24 years olds polled said they found their closest city or town centre appealing.  When asked what they thought the advantages would be of online retailers opening physical stores, nearly two thirds of people highlighted the ability to see and try products before purchase, with only one in ten citing convenience.

All of this says that whilst younger consumers find online shopping most convenient, the experience of high street shopping is still unparalleled by the internet.

A study by the Harris group found that 75% of Millennials value experience over material things, so their support of high street shopping is as likely to be a social or leisurely task as it is a day of purchases. As well as being fans of the high street experience, 65% of 18-24 year olds said they would pay more for ethically sourced products.

Whilst it’s unlikely to see the empire of cheap-and-fast retailers like Primark fall any time soon, the ethical views of the younger generation could be good for small businesses and may eventually lead to more ethical practices across the board of retailers, even if it would mean a heftier price tag.

Overall, high street retailers and their investors should not be panicking any time soon. So long as businesses adapt to work in harmony with the world of online shopping – such as click and collect or online stock checking at a local store – high street stores can survive.

The younger generation’s affection for the experience of high streets and shopping centres suggests that there shouldn’t be any significant generational decrease in footfall over the coming years. Should the retail market suffer, young people are unlikely to be at fault, and given the opportunities that have arisen in light of the recent store closures, businesses have a chance to seize them and potentially thrive.

Casey Denaro - Digital Media Co-ordinator, PropLIst

Sources
Image by Arnie Chou 

https://www.telegraph.co.uk/investing/shares/high-street-isnt-dead-retailers-worth-investing/

https://www.telegraph.co.uk/business/2018/06/28/rise-discerning-young-shoppers-throws-lifeline-high-street/

https://www.telegraph.co.uk/business/2018/03/17/high-street-faces-major-crisis-bargain-booze-carpetright-join/