Commercial property agent sees more areas reporting steady rent values. But Scotland’s retail performance is mixed and issues remain, says Colliers.
THE years since the recession hit the UK have been marked by many retail vacancies, and in many parts of the country property owners have had to offer reduced rents, but that may be changing, says commercial property agent Colliers International.
Scotland’s retail rents are showing small signs of strengthening, despite a decline of 0.7% in the last 12 months, the sixth year of decline in a row, according to the Colliers International 18th Midsummer Retail Report, launched late last month.
Despite the overall decline in rental values, there had been a rise in the number of retail centres with stable rents, up from 13 to 19. Some 70% of centres saw rents stabilising in 2014, up from 48% in 2013, and there had also been a reduction in incentives offered to retail tenants, the report said.
However, average rents remain 23% lower than in 2008, when the recent economic difficulties began in earnest.
And south of the border rents in London are increasing at pace and for the first time many regions other than London are showing increases.
While stabilising or increasing rents might not be the best news for retailers who are looking for a property bargain they do suggest that the wider economy is looking up.
Across the UK, with the exception of Wales, prime rents increased by 1.8% over the last 12 months, boosted by a rise of 11.6% in central London. Areas such as outer London (up 4.7%); England’s east Midlands (up 2.7%) and Yorkshire and Humberside (static) were all ahead of the movement of retail rents in Scotland. Prime rents in Wales dropped by 9.1%.
Various Colliers International executives were keen to say it was too early to suggest that things were looking up and urged government action to encourage commercial activity.
Tom Johnston, director and head of retail with Colliers International in Scotland, said: “Any sign of an improvement in the hard-hit retail sector is good news. However, these are very small changes. We are yet to see a significant increase in retailer demand and there may be some time before there is any evidence of a tangible improvement.
“In the meantime, Scotland’s retail sector as a whole remains in a fragile state. A strong retail sector is important to the economic well-being of Scotland and we must look at innovative new ways to encourage retailers and shoppers back into city and town centres. National house builders could play a key role in this process and there is growing evidence that Business Improvement Districts may also have a positive impact.
“The relationship between pedestrianisation and footfall must be fully reviewed, to prevent future initiatives from inflicting further damage on retail businesses. In parallel, the time has come for local authorities to remove parking charges in certain city and town-centre areas, which will help increase footfall and trade.
“The Scottish Government must also take steps to review the material change of circumstance appeal right, which places Scottish business ratepayers at a serious competitive disadvantage to the rest of the UK,” Johnston said.
Mark Charlton, Colliers International’s head of research and forecasting, was relatively upbeat. He said: “Rents in Scottish towns and cities are stabilising, with the historic rental trend following a very similar trajectory to that of the rest of Great Britain, excluding London.
“While economic recovery has lagged a little, unemployment is falling and GDP growth is gaining momentum, with the forward-looking Purchasing Managers’ Indexes also modestly positive for Scotland. We can look forward to the return of rental growth to the stronger, dominant retail centres.”
John Duffy, director in-town retail Scotland for Colliers International, said: “The market has had a tough time and is coming up for air. Most of Scotland’s high streets are over-supplied, with the notable exceptions of George Street, Edinburgh; Buchanan Street, Glasgow and St Andrews. In many of the ‘losing’ towns, initiatives are being explored to convert shops into other uses, such as residential, catering and offices.
Chris Humphrey, director out-of-town retail Scotland for Colliers International, said: “The Commonwealth Games has encouraged the development of many sites that would ordinarily not have been developed for another 10 or 20 years.
“At a more local level, good demand is being experienced for development of new build, value-driven neighbourhood schemes, typically occupied by acquisitive operators, including Lidl, Aldi, Iceland, Home Bargains, B&M and Poundland.”