The health of UK bricks-and-mortar retail in six charts

Despite the lack of lockdowns, the economic situation was not all sunshine and roses. The Russian invasion of Ukraine in February and the unwinding of international supply chains led to rampant inflation, which created a cost-of-living crisis for millions of consumers.

Retail Week analyses the Local Data Company’s (LDC) Retail and Leisure Trends Analysis 2022 to gauge the strength of UK retail destinations in the year that was, and see how they will fare in what is likely to be another challenging year.

Openings versus closures

Despite the bleak economic outlook that pervaded much of 2022, the year also saw the gap between store openings and closures narrow to its smallest gap since 2016.

Net change in units across the UK was -3,365, a 57% year-on-year decrease from the 2021 figure of -7,902. Across the UK, there was a 5% decrease year on year in the number of store closures, showing the sector was more resilient than it had been at any point over the last three years as CVAs and insolvencies from struggling brands decreased.

While the gap closed, the 48,694 openings seen over the year represented a 5% dip in new stores, which reflected the impacts of the ongoing political and economic uncertainty that gripped the UK, supply chain issues and spiralling inflation.

The LDC data also showed vacancy rates across the UK declined across the UK across high streets, shopping centres and retail parks.

Overall vacancy rates ended 2022 at 13.8%, down 0.6% on the previous year – the greatest year-on-year decline in vacancies since LDC began keeping records in 2013.

Retail vacancies ended the year at 15.3%, while leisure vacancies hit 10.5% for the year. Both rates decreased in the period, driven by retail units being converted into leisure or other uses faster than they were being closed.

While the current rate remains higher than the pre-pandemic of 12.1%, showing the retail sector has yet to fully recover from the effects of coronavirus, this improvement is expected to continue.

Across the UK’s 650 top town centres, total retail units dropped 1.3%, while leisure units rose by 2.2%, as landlords sought food halls, cafes, restaurants and entertainment venues to occupy small, formerly vacant units.

Park life

The LDC data found that out-of-town retail parks continued to be the most attractive location type across the UK in 2022. This destination was the only one to achieve a net increase in units of 0.4% for the period. UK retail park vacancies dropped to 9% in 2022, a 2.3% improvement in rates, and the closest to pre-pandemic levels.

Key growth areas for this demographic were drive-thrus, mainly in the cafe and food-to-go categories, which saw a net 52 unit increase over the period.

Another major boost was in retail park health and beauty stores, which jumped net 36 units in the period, up from a net decrease the previous year.

Shopping centres also enjoyed a stronger year, finishing with a flat net change in retail units for the period. Shopping centres benefited due to a lack of administrations among fashion and department store brands, which had marred previous years, leading to closures declining to -138 in 2022 versus -801 in 2021.

Net change in UK high streets was more subdued at -0.4%, while standalone retail stores slipped -0.9%. This took the UK high street from the best-performing location in 2021 to the worst in 2022.

Persistent vacancies (defined as units being empty for more than three years) climbed across locations. Shopping centres suffered worst from this with persistent vacancies rising to 6.5% in 2022, while high streets and retail parks saw a 0.3% increase each.

Leisure and convenience king

New leisure and convenience stores were the two strongest categories, with +904 and +430 net new units opening during 2022. These were the first two categories to record more openings than closures since 2016.

The growth in leisure space was driven by fast-food operators, with a focus on acquiring new drive-thru locations.

LDC said comparison retail continued to recover well in 2022, with net decline improving to -2,391, the lowest figure since 2016. This was due to a “massive reduction in closures” of fashion and clothing retailers.

However, all retail categories saw an improvement in net change in stores for the first time since 2013. Fashion saw a net decline of 400 units, compared to -1,626 in 2021.

Fast-food takeaway was the fastest-growing subcategory of bricks-and-mortar stores in 2022, with a net increase of 445 units – driven by the likes of German Doner Kebab, Five Guys and Leon.

C-stores bounced back from a 2021 dip to net growth of 420 units – the largest year-on-year increase for convenience since LDC records began. Beauty salons, bars and nail salons overtook barber shops as top-five growers.

The largest number of closures by category was in banks and financial institutions (-676), followed by hairdressers (-527), newsagents (-269), recruitment agencies (-268) and charity shops (-226).

In a change from recent years, 2022 was a struggle for independent bricks-and-mortar operators, as the end of government support combined with rising inflation saw new openings fall to 262 net units.

By comparison, the decline in multiple unit operators fell to -3,627 in 2022, down from more than 10,000 the previous year.

Looking ahead to 2023, LDC commercial director Lucy Stainton said: “Q1 2023 has already seen new international entrants to the UK market, brands committing to open more stores and a focus on placemaking, regeneration and redevelopment.

“While we know it’s going to continue to be tough for a while – when is it ever easy? – 2023 will hopefully prove another year of recovery and stabilisation.”