Retail has undergone huge changes since the pandemic, which saw many shops shut their doors for good.
This resulted in a lot of retail casualties, most notably Debenhams and Arcadia Group, which were already struggling pre-pandemic and both collapsed into administration and permanently closed stores in 2021.
The impact of lockdowns meant retail destinations were littered with vacant units and this is still the case in 2023. High rents and unsuitably large units have prevented traditional retailers from acquiring spaces.
Local Data Company’s (LDC) latest retail and leisure trends analysis showed the overall UK vacancy rate inched up slightly to 13.9% in the first half of 2023.
LDC commercial director Lucy Stainton says: “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.”
But despite economic woes and challenges, there is still growing interest from various sectors looking to expand their store portfolios.
Discounters and grocers
Research from GlobalData shows the UK value, discount, variety stores and general merchandise retail channel is forecast to grow 5% per year until 2027 with the industry expected to be worth £59.4bn by then.
Many discounters already have an expansive store portfolio, which has become more evident recently as B&M and Poundland have taken on over 120 former Wilko sites between them and both Aldi and Lidl are on an expansion drive to eventually open around 1,500 stores each.
LDC reported that net closures for chains have reached the “lowest level since 2017”. Stainton says this 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”.
British Land head of asset management and retail parks Matt Reed says it has let “nearly every former Arcadia” store to retailers including Home Bargains and Poundland, and believes retail parks have shifted from predominantly bulky white goods, pet shops and furniture shops.
“Landlords have been able to reposition as the demand from discounters like Aldi, Lidl, Home Bargains and B&M have been there and they are taking space in retail parks,” he says.
“The discounters have driven regular footfall once or twice a week with a small basket food shop and because of that, a halo effect is created where a regular spend comes on and successful omnichannel brands want to be near that and benefit from that halo effect.”
Healthcare hubs
As well as growth in the presence of discounters, healthcare hubs are also popping up in various locations.
Ellandi asset management director Christina Beggan says there has been “a lot of activity” in shopping centres with NHS branches taking space.
“I think during Covid, it was difficult for people to get to the hospital for simple procedures and it was thought that these services should be out in the community more,” she says.
“It has taken a little bit of time to get these health hubs off the ground and when you’re dealing with a big organisation like the NHS, it’s never a quick implementation.”
She says old units are being developed specifically for health services such as electrocardiograms and blood tests that can be performed outside of a hospital.
The Alhambra shopping centre in Barnsley could be turned into a “health and wellbeing hub” with retail still within the centre, following the successful opening of the NHS community diagnostic centre in the nearby shopping centre The Glass Works.
Barnsley Council said the diagnostic centre helped achieve a 22% increase in breast screening rates from April to October 2022.
Reed says healthcare is a sector British Land is willing to explore for its retail parks. He adds: “There’s pressure on the NHS to deal with waiting lists so outsourcing that means opening centres for MRIs, blood tests and X-rays that help to clear the backlog. A space for this in a retail park is good for a customer as it’s another use fulfilled.”
Leisure and entertainment
The vacancy rates across retail parks lowered in the first half of 2023, with LDC reporting that gyms, coffee shops, supermarkets and fast-food outlets are rapidly expanding.
Its recent retail and leisure trends analysis also showed it is becoming common for superregional shopping centres to “repurpose the large vacant units left behind by department stores” for leisure and entertainment such as Gravity and Boom Battle Bar arcades.
Plans have been approved for a former Debenhams store in Colchester to be turned into an indoor go-karting track. Reed says large vacant spaces are attractive to leisure operators.
“We had 50,000 sq ft of an old Arcadia, Mothercare and another unit that went into administration, which we let out to Hollywood Bowl and Ninja Warrior, and we’ve seen increased spend in the retail element,” he says.
Having leisure operators in a shopping centre is “good for retailers” according to Beggan who says customers can use the centre for many different purposes.
“Most retailers that we speak to are really happy when we tell them that a certain leisure company will occupy a space near them as people may come into town for a day out,” she explains.
“They’re shopping in the morning, then using leisure facilities and eating in the restaurants later in the day, so more people are coming into the shopping centre for more reasons than before.”
Stainton says there needs to be a focus on addressing long-term vacancies and developing retail destinations.
“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,” she says.
If you are operating in a retail destination today, there needs to be a lot on offer to create a vibrant and modern space, cater to the customer experience and drive long-term vacancy rates down.
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