Goodbye Piccadilly, farewell Leicester Square: Where are retail’s new property hotspots?

Non-essential shops reopened on June 15, but shoppers have not rushed back to the high street – and it’s no surprise that city centres have fared worse than other locations given that many people are still working from home.

For example, footfall in London’s West End was down an eye-watering 80.8% year on year in the first week stores opened their doors, according to Springboard. 

Even the reopening of pubs and restaurants failed to bring people into central London. Visitor numbers plummeted 76% year on year over Super Saturday weekend, when these establishments swung open their doors again, compared with the average 50% drop across all shopping and leisure destinations in England.

_{Source: Springboard}

It’s not just the centre of London that shoppers are avoiding. According to data from the Centre for Cities, Manchester, Liverpool and Newcastle joined the capital as some of the locations that experienced the smallest bounces in weekly footfall in the week following store reopenings. 

Meanwhile, smaller towns and cities, such as Warrington, Hull and Telford, were among those that enjoyed the biggest increases.

“Provinces are performing much better, but big cities like London are a nightmare”

Chief executive, footwear retailer

The property boss of an international fashion retailer with a handful of stores, predominantly in London’s West End, says demand has been so weak it has barely been worth opening.

“Most of the retailers I know are taking a few hundred pounds a day, and if it carries on much longer I think most would consider closing down again to reserve cash,” he says. “For a few more weeks anyway, in the hope that demand and footfall return.”

The chief executive of one footwear retailer agreed, saying that trading since reopening has been polarised: “Provinces are performing much better, but big cities like London are a nightmare.

“There’s a lot of retailers that are going to close down their central London stores again for a while as they’re not covering the cost of wages and electricity.”

With coronavirus still an ever-present threat, this could be seen as a short-lived trend that will reverse as life slowly returns to normal. However, the footwear boss believes a return to local shopping is here to stay. 

“People have forgotten what it’s like to shop with people that they know, or can get to know. During lockdown, they got to know their local shopkeepers. They won’t forget that quickly, so hopefully [shopping locally] will continue.”

One retail consultant says the shift in destination popularity is leading retailers to re-evaluate where their store priorities lie.

“The pandemic has changed everything in just a few months. It’s led many of my retail clients to do 180-degree turns when it comes to planned store closures,” he says.

“At the start of the year, many would have been looking to jettison stores on local high streets and in towns which were struggling. Now, it’s gone completely the other way and they are considering closing more urban centres and shopping centres, because no one’s commuting, no one’s travelling and nothing is really open.”

Take Pret, for example. The sandwich chain has revealed it will close 30 branches in the second half of 2020 as a result of coronavirus.

Eleven of these shops are in London, in prime locations such as Piccadilly, Fleet Street and The Strand. Locations outside London include those in shopping centres such as Metrocentre, Gateshead, Lakeside, Essex, and Capitol, Cardiff.

Focus on local stores

Brands with sprawling store estates that focus more on local high streets and regional town centres have enjoyed something of an uptick since non-essential retailers have been allowed to reopen.

A source at one mid-market fashion group says it is now “doubling down on our ultra-local high street strategy”.

“The internal view is that these ultra-local high streets are less impacted by commuting and behavioural change because everyone lives within a stone’s throw,” he says.

“We also think that the last few months may encourage more people to stay and shop local, rather than going to bigger, out-of-town retail centres and hubs.”

Former Sainsbury’s boss Mike Coupe suggested that reconfiguration may be necessary in the grocery sector too, before he stood down in late May.

“Some of our most successful convenience stores are in the big city-centre locations – they are closed at the moment because there really is no traffic. You might, potentially, have to reorientate your convenience business in a different direction because some of the ones near to where people live are a lot more buoyant,” he told Retail Week.

“Generally, people are staying and spending more locally and that will start to inform retailers’ acquisition programmes going forward”

Emma Mackenzie, NewRiver

Landlords are expecting this to result in more demand for secondary and tertiary locations.

Emma Mackenzie, head of asset management at landlord NewRiver, which owns 33 community shopping centres and 25 retail parks across the UK, says: ”A lot of retailers say that local stores are trading better than the big destination locations. 

“Generally, people are staying and spending more locally and that will start to inform retailers’ acquisition programmes going forward.

“Even if, once this is over, people are only working from home more two or three days a week, that’s still local demand and there’s going to be plenty of opportunities to soak that up.”

Matt Slade, retail director at Quintain, which owns London Designer Outlet (LDO) in Wembley Park, says a number of fashion retailers are now considering taking space in his centre.

“There used to be some brands that didn’t want to come to LDO because they viewed it as an urban location that was too near places like the West End,” he says.

“However, over this period, we’ve had a whole bunch of really good, interesting, aspirational brands that hadn’t previously wanted to come that have now agreed deals.”

Of course, LDO is benefiting from its status as an off-price centre, given that many fashion retailers have a whole season’s worth of stock that they need to offload at a discount.

Changing rents

The resurgence in local shopping is clearly leading to a reappraisal of where stores should be, and the prospect of a portfolio made up of local stores, with lower rents to pay, will be appealing to many retailers.

The landlord of a regional shopping centre tells Retail Week that the pandemic has certainly “made the retention of existing tenants easier” due to his site’s location and importance to the local community. 

“It might actually be quite good for the retailers that survive. Rents will come down across the board, because valuations are coming down and have been for some time”

Regional shopping centre landlord

The fashion property boss says some local landlords are already trying to take advantage of the newfound popularity of their stores. ”I know of several instances where landlords in places like Caterham are demanding full rent during lockdown.”

However, the shopping centre landlord believes that local high streets will be under as much pressure to readjust rents as the rest of retail’s property owners.

“Coming out of this, it might actually be quite good for the retailers, hospitality and leisure operators that survive. Rents will come down across the board, because valuations are coming down and have been for some time,” he says.

”The government have obviously already cut business rates and I’d imagine it would look at them again next year. It will also probably offer grants and all sorts of things. So it could be a good time to try, or stay in, bricks and mortar.” 

The effect on once prime retail locations, such as London’s West End, could be profound.

Tycoon Theo Paphitis, who owns Ryman, Robert Dyas and Boux Avenue, is adamant that rents will have to come down. 

“Rents have to change, and if they don’t we’ll see some very empty shopping centres and high streets with their lights turned off,” he says.

De Mello believes that rents in prime locations will fall faster than other destinations, particularly for retailers on turnover-based rents.

“If retailer turnover is on average 60% of what it was pre-Covid, and turnover rents on average are agreed at say 10%, then prime rents in a lot of major centres will likely drop to 40% in the short term.”

Since the pandemic turned the world upside down in March, people have become reacquainted with their local high streets, and four months is more than enough time to turn relatively new behaviours into habits.

While this may help to breathe life into long-suffering local high streets, city-centre sites that were once the places to be could be seeking new lifelines.