Decline in shop vacancy rates may signal ‘new phase of physical retailing’

Retailing in the UK is showing signs of stabilising post-Covid with shop vacancy rates falling for the first time since 2018.

The latest analysis from retail insights company Local Data Company (LDC) for the full year of 2021 concluded that “the worst of the pandemic is over” for the retail and leisure sectors and that there was cause for “cautious optimism”.

In the second half of 2021, the national shop vacancy rate fell by 0.1% over H1, landing at 14.4%. This was the first time the vacancy rate had improved since the first half of 2018.

However, over the full year, as opposed to just H2, the national vacancy rate increased by 0.7%, which was lower than expected given the lack of activity in the first three months of the year due to lockdown.

The retail vacancy rate hit a record high in 2021, but peaked in the first half at 15.8%, with a decrease of 0.1% in H2. This figure looks set to decline further as more units are taken off the market for repurposing and as retailers return to acquiring new sites, said LDC.

High streets proved more stable than other locations, with vacancy rates declining by 0.1% in H2 of 2021. They were up by only 2.3% over H2 2019, whereas they rose by 3.2% in retail parks and 4.8% in shopping centres.

These figures suggest high streets were not as heavily impacted by Covid-19 as other location types, being less exposed to at-risk brands and having a higher percentage of independent occupiers who benefited from extra support from the Government.

The LDC said it did not expect vacancy rates to return to pre-pandemic levels yet, but said they are projected to decline further over 2022 thanks to the continued redevelopment and repurposing of retail space.

Commenting on the latest figures, LDC commercial director Lucy Stainton said: “This latest analysis is significant because the figures finally point to a reversal of the structural decline we had seen accelerate with the onset of the Covid-19 pandemic. Going into this, the physical retail market had already been plagued by a number of other headwinds, such as online and digital adoption, but the coronavirus brought about long periods of restricted trading and this proved insurmountable for many chains across both retail and hospitality.

“Vacancy rates peaked halfway through 2021 as a result of this but, as we come into 2022, these latest statistics are cause for cautious optimism, with the number of empty shops finally coming down as consumers return to high streets and shopping centres. Our analysis points towards this trend continuing as the final shakeout from various CVAs and insolvencies is hopefully behind us and independent operators continue to open new sites.

“With many chains re-looking at their strategy for growth, the independent sector proving buoyant and an unprecedented level of repurposing and redevelopment, we could be seeing the start of a new phase of physical retailing and we will be tracking this very closely.”

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