Retail’s green shoots give cause for optimism
#Week12 saw something of a return to reality for the Innesco team, with the spring sunshine of Cannes swapped for a drizzly East London, so it was a welcomed uplift in mood to join Local Data Company (LDC) for the launch of its 2022 Retail & Leisure Trends Analysis. Given the report’s optimistic findings on vacancy rates, the choice of location – the recently-opened Shoreditch High Street flagship of pop-up retail specialist Sook – was a particularly appropriate one.
LDC’s analysis has always been among the best measures of the sector’s health and the report is always keenly anticipated, especially this edition, which reported on the first full year without COVID restrictions since 2019. The insights it provided – falling vacancy rates, a slowing of net closures and positive signs for shopping centres and retail parks – gave strong grounds for optimism for anyone interested in the future of physical retail.
A potent mixture of online shopping and a global pandemic has hit the sector hard, but the pessimism always seemed a little overdone. For years the more apocalyptic commentators have forecast a world where our town centres will be little more than tumbleweed-strewn wastelands, but in truth people were always going to need physical retail – just perhaps not quite as much as before. There was always going to be a floor to the sector’s troubles, and LDC’s data shows we may in fact have already hit it.
2022 saw occupancy increase at its fastest rate (0.6%) since 2013, and while total vacancies at 13.8% remain above their pre-pandemic level, things are moving in the right direction. The gap between store openings and closures narrowed to its smallest level since 2016, with less than half the net closures than in the previous year. Perhaps most encouragingly, LDC is forecasting continued progress with both vacancy rates and net closures into 2024.
Look at specific asset classes and the picture is even more heartening. Rising occupancy was particularly pronounced in shopping centres – vacancy rates fell by 0.9% over the year – and while this was mainly driven by short-term leases, it reflects the efforts made by owners to attract new retailers and leisure operators into their destinations. New food and beverage options, including growing drive-through operators, made retail parks the most attractive asset class.
There are obviously areas, particularly those locations that have been hit hardest to date, where further decline is possible. But retail must embrace the good news when it’s available, and LDC’s stats give cause for optimism. There remain ‘hard yards’ ahead, and retailers need to find ever more ways to encourage shoppers to visit their stores – something Mary Portas picked up on with her open letter to John Lewis about the partnership’s importance to the wider ecosystem – but we can all hope that we’re finally seeing those green shoots take root.