Retail rents have fallen in the past year but still have further to go.

The respected Midsummer Retail Report from agent Colliers was launched today and it doesn’t make very pretty reading for landlords. Retail rents fell 1.5% in the past 12 months and are expected to fall a further 4% in the next year as a renewed squeeze on consumer spending bites.

That is of course good news for retailers - unless they’re locked in on lengthy upward only leases - and it seems that the predictions of some leading landlords that the market would move away from tenants during this year were a little premature.

Falling rents are a simple function of supply and demand, and in truth they probably should have fallen further were it not for the way landlords do anything to avoid a lower headline rent being set, which affects the value of their centres. But once property owners are willing to accept a bit of pain, it opens the way for new deals to happen, which anecdotally is what is taking place now.

Two things stand out in the research. The first is the big differential between the performance of stronger and weaker centres. Good centres have picked up - rents in Guildford up 16.7% - while weaker ones have really suffered, with Dunstable down more than 45%. That really reinforces how secondary centres are unlikely to ever recover what to what they were and how pressing the need to find alternative uses for shops in those locations is.

Secondly, I was surprised to see Colliers saying it thinks 20% of spending will be online by 2020, not because I disagree, but because the property world has traditionally buried its head in the sand when it comes to the impact online will have. That means that the fall in rents we’re going to see is not just about austerity measures or the squeeze on consumer spending, but about a fundamental shift in how people shop.

That doesn’t spell the end of bricks and mortar retail by any means, and stores are going to play a vital role in the multichannel future. But what it does mean is that sales growth through stores is going to be hard for retailers to come by, which in turn will require landlords to be realistic in their expectations. The golden age for retail property owners has gone, and is probably never coming back.

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