Retail remains strong despite cost-of-living crisis, says report

There were high levels of activity across Britain’s retail locations in the first half of 2023 despite the effects of the cost-of-living crisis.

This was among the findings in the latest Retail and Leisure Trends Analysis H1 2023 from the Local Data Company (LDC), which measured the performance of the retail and leisure markets over the first half of 2023. The survey is said to physically monitor every GB consumer-facing business across 5,250 towns and cities.

Although retail and leisure closures were up by 11% at 27,504, the survey showed that this figure was matched closely by 23,504 new businesses opening – the highest level of openings since H1 of 2014.

Retail parks were the only location type to show more openings than closures, with a net gain of 0.6%. Vacancy rates across retail parks were at their lowest since 2019 at 8.1% as a result of strong leasing activity.

High streets saw a decline in units of 0.7%, with only a 0.1% drop in the vacancy rate. But the report said that this was against a backdrop of underlying redevelopment.

Shopping centres saw a decline of 0.9%, up from 0.3% in H1 2022, but greatly improved over the 33% figure recorded in 2021, with a fall in vacancy rates from 19.4% in H1 2021 to 17.8% in H1 2023. LDC said the improvement was driven by rebased rents, reduced CVAs and administrations and continued efforts to redevelop former department store units.

Less encouragingly, the report also highlighted that after a strong performance in H1 2022, independent retail business struggled in 2023 with a net increase in units of 1,335 units set against a net decline of 1.915 units, which was the largest net decline in seven years.

The multiples, however, were better able to cope with the challenging market, said LDC, but still suffered a net decline in units of 2,085, although this was the best sector result since H1 2017.

Some of the fastest growing retail categories, said LDC, were supermarkets and health and beauty brands.

Commenting on the new figures, LDC commercial director Lucy Stainton said: “Challenges to the market in recent years have tested the staying power of even our best-loved chains. What resulted from the pandemic was a stress-tested and relatively resilient retail sector, which has helped to mitigate the effects of the latest economic headwinds. Net closures for chains have reached their lowest level since 2017, which is a testament to the recovery efforts of retailers and landlords, and some sectors of the industry – particularly retail parks, food categories and supermarkets – have continued to strengthen.

“That being said, the picture for our independent retail and hospitality operators in the first six months of this year is unfortunately less positive, with a significant swing from record growth in the first half of last year to troubling net losses in the first half of 2023. As government support lessened and the energy crisis hit, we saw this disproportionally impact sectors like hairdressers and pubs.”

She concluded: “These changes have caused a slight uptick in overall vacancy but going forward, the focus has to be addressing long-term vacancy, curating high streets and town centres that meet the needs of their present-day catchments, and making the most of a physical store presence as a complement to online channels. We have seen some great examples of repurposing and redevelopment of former retail and leisure space, and this repurposing will need to continue to be a feature of the market in order to mitigate any emerging structural challenges and ensure the vibrancy and usability of our urban and commercial spaces for their adjacent communities and consumers.”

In its conclusion, the report predicted that vacancy rates will rise in the second half of 2023, albeit only by 0.1%. It forecast that vacancy rates would remain stable until 2025 as easing economic pressures influence a period of normality.

Its forecast for openings and closures suggested a net decline in units over 2023, but still lower than the rate of decline in 2022. It predicted an improvement in 2024 and 2025 as stability returns and retailers look towards growth again.

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