An unprecedented wave of investment in U.K. town centres won’t stop the long-term migration of retail sales to out-of-town parks, according to new reports from Verdict Research.
In Out-of-Town Retailing 2008 and Town Centre Retailing 2008, Verdict says the huge amount of space allotted for town centres is arriving at the worst possible time and could create more problems than it solves.
While out-of-town retailing has been harder hit than town centres by the current economic downturn, landlords and retailers have made a concerted effort to improve the out-of-town shopping experience. For this reason, Verdict expects out-of-town to bounce back and lead the recovery.
Richard Lowe, head of retail and wholesale for London at Barclays Commercial Bank, agrees: “Out-of-town retailers are well poised to take advantage of the upswing that will follow the current challenging economic conditions,” he says. “The sheer amount of space in out-of-town retail parks provides retailers with the opportunity to broaden and diversify their offering to customers.”
Verdict says out-of-town retailers are well poised to take advantage of the upturn if they improve their facilities and drive footfall and dwell time.
But the outlook for town centres is bleak. Verdict reports the average annual growth of town centres was just 0.6 percent in the three years to 2007, as many retail outlets were replaced by bars, restaurants and coffee shops.
At the same time, consumers defected to shopping online and the convenience of out-of-town shopping, it says. The comprehensive ranges of the leading supermarkets, in particular, have provided a strong draw, Verdict adds.
As a result, town centres are attempting to grow by expanding ranges – a strategy that requires larger stores.
Government has also encouraged expansion and innovation in town centres, says Verdict, while developers are flooding the market with new space that is not really needed. Verdict reveals 7.6 million square feet of shopping centre developments will be added this year, including developments in Liverpool, Bristol and West London.
But the new space will not bring a corresponding increase in sales, Verdict warns. “Town centre is facing a significant oversupply of space in the next few years, at the worst possible time, and it will be the older space that loses out,” said Malcolm Pinkerton, senior analyst at Verdict Research and author of the report.
“Moreover, in the short term at least we are likely to see a huge glut of unwanted space,” said Pinkerton. “Those retailers that remain in town centres will want to be present in the newest developments, leaving some town centre locations empty and desolate.”