Data: Retail vacancies start to stabilise after year of record highs

As the UK marks two years since being plunged into the first, unprecedented first lockdown in the wake of the coronavirus pandemic, retail and hospitality bricks-and-mortar operators are still counting the costs. 

While the pandemic put a huge strain on physical retail destinations up and down the country, it also served to accelerate trends that were already playing out. 

New analysis of the retail and leisure market by Local Data Company – called The Road to Retail Recovery: Are we there yet? – paints a picture of bricks-and-mortar recovery after a gruelling two-year period of rolling lockdowns exacerbated by headwinds from Brexit, the emergence of new Covid-19 variants and the rise of online competitors. 

The data provides a snapshot of the post-pandemic health of the UK’s high streets, shopping centres and retail parks.

Into the voids

In the second half of 2021, vacancy rates in the UK declined for the first time since the first half of 2018, though they were still up over the full year.

The national vacancy rate in the second half of last year, tracked across the top 650 town centres, dropped 0.1% to 14.4%. The rise over the year as a whole was “considerably lower than expected given the emergence of the Delta variant and the resulting lockdown”, according to LDC.

The recovery has been mostly driven by the leisure sector, in which vacancies dropped 0.3% in the second half of 2021 – the largest single decrease since LDC began tracking this metric in 2013.

That was boosted by a return of many office workers around September and the England football team’s strong run in the Euros when customers piled into pubs and other hospitality venues to watch the matches. 

Retail recovery, by comparison, was more gradual, after peaking at a record high of 15.8% in the first half of 2021. That figure is expected to shrink as “more units are taken off the market for repurposing and occupiers seize on greater certainty in the market to expand their estates”.

In terms of openings and closures, more stores were closed across the UK last year than opened. There were 43,167 new units occupied across the UK over the year, compared to 51,069 closures – a net loss of 7,902 units.

Despite the decline, LDC said the figures were impressive “given much of the first quarter of 2021 was spent in lockdown” and show “a continued appetite for physical retail, a continued belief in the relevance and importance of a physical store estate” and a switch in mentality from survival to growth. 

Only 1,758 stores were closed during 2021 due to retail administration – the lowest figure since 2017.

Location, location, location

In terms of the net change in units, high streets and shopping centres experienced a marked improvement in 2021 compared to 2020. 

While net change figures dropped at both types of location over the period, out-of-town sites suffered.

With largely value-led offerings, parking and a larger size that made them ideal for social distancing, retail parks were the most resilient location during the pandemic but they suffered a notable net decline in 2021.

Vacancy rates at all retail destinations fell in the second half of 2021, following ‘Freedom Day’ and the removal of most social distancing requirements. Rates dropped most at shopping centres, followed by retail parks and high streets. 

While high street vacancy rate recovery has been more subdued than other destinations, they are up only 2.3% since LDC began measuring the stat in 2013, the lowest overall of all retail destinations.

In terms of persistent unit vacancies, shopping centres continue to have the highest rates. The percentage of units sitting vacant for three years or more is 6.1%. 

Persistent vacancy rates are lower at retail parks. Only 2.9% of vacant stock there has been empty for over three years.

Independents day

Some large retail brands were hit hard by the pandemic, leading some to rationalise their estates.

While multiples benefited from a swathe of government assistance schemes during the pandemic, 2021 brought the end of the furlough scheme and the capping of business rates relief at a £2m rateable value. 

As a result, 2021 brought the biggest decline in multiples on record – 10,059 units closed. 

That presented independent operators with an opportunity to take space. LDC noted a net increase in independents of 2,157, making it the first time since 2016 that more independents opened than closed in a year. 

By region, Wales was the most resilient area of the UK in 2021. It was the only area to report a decline in vacancies during the period, down to 18.8%. Scotland was the next most resilient (12.6%) along with Greater London (10.6%) – both reported only 0.2% increases in vacancies during the period. 

The West Midlands was the hardest hit region in 2021 as vacancies jumped 1.5%. LDC also said, within England, a clear North/South divide was evident.

Out of the frying pan

After two years of unprecedented turmoil, bricks and mortar operators would had been looking to February this year and the end of all Covid-19 restrictions in England with a sense of relief. 

However, the issues facing the UK’s retail destinations have not gone away; they have simply changed. With rampant inflation squashing consumer confidence, and the cost-of-living crisis driving down discretionary spending, how are retail destinations prepared for the next crisis to face the UK? 

LDC expects vacancy rates to continue to recover in 2022, though it does not expect them to return to pre-pandemic levels this year. 

Occupiers and landlords have predominantly already agreed on deferred rent packages and other forms of support ahead of the end of the rent moratorium, which should help reduce closures. 

Some landlords have decided to repurpose units, which will take them out of the retail and leisure market, and that will also help correct vacancies. 

With minimal direct support for businesses or consumers in the spring statement from chancellor Rishi Sunak, LDC suspects that chain retailers will continue to limit openings in 2022, although the latest data does give some grounds for optimism that the retail landscape is not finally settled.

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