October 17, 2014
Vacancy rates for retail warehouse space in the UK have dropped to 8.0%, the lowest on record since 2006, according to a new report by leading retail property research consultancy, Trevor Wood Associates. The latest findings were published at the Annual Accessible Retail Conference in London yesterday (16th October). Rates have fallen nationally from 8.8% at the end of last year, due in part to an improving economic climate, the continued rise of comparison good retailers and precious little new stock being built.
Trevor Wood Associates revealed that East Anglia has the lowest vacancy rate in the UK at 5.2% and Northern Ireland the highest at 10.9%. The fastest growing tenants are Wren Living and Poundland, which have both increased their presence on retail parks by over 100% since 2012. B & M is in third place with a 59% increase in space. The top three direct property owners within the retail park market at the end of the third quarter 2014, are British Land, Hammerson and Land Securities. The Crown Estate has moved up to fourth place following its acquisition, with Gingko Tree Investment, of Fosse Shopping Park in Leicester in August 2014.
Trevor Wood Associates’ Definitive Guide to Retail & Leisure Parks reviews the out of town sector’s annual performance at the end of each year, although some key tables are updated mid-year. The updated report found that at the end of the second quarter of this year, levels of empty space at both free standing retail warehouse units and retail parks, were at their lowest since 2006. In contrast, vacancy rates at the same time the previous year had risen to 10.0%, so 2.0% of space nationally has been occupied in just one year.
With little development taking place, the ‘second hand’ market has continued to be an important supply of accommodation for expanding retailers, with particular demand for good quality open A1 consent or bulky goods units. A significant proportion of the retail warehouse space vacated over recent years by failed retailers has been successfully re-let, with a sizeable number of units currently under offer.
Commenting on the research, Trevor Wood said: “We have seen some dramatic drops in vacancy rates in some regions, but the volume of out-of-town retail in regions outside the South East and North West for example, is significantly lower and can fluctuate wildly as a result of a small number of failing or booming retail parks. Comparisons between English regions and Scotland or Northern Ireland should also be looked at with caution, as they are different markets.
“The national drop in vacancy rates is down to an improving economic climate and little new stock being built, which means that as retailers seek to grow again post recession, the vacancy rate was bound to improve quickly despite some gaping holes left by failing retailers. Most recently, the majority of units vacated by Kiddicare have been snapped up by retailers such as Next and by JD Sports for its new Ultimate Outdoors brand.”
The report finds that retailers such as B & M are taking up reasonably priced warehouse units on secondary and tertiary parks, whereas firms such as Marks & Spencer and Next are acquiring space on higher quality retail parks. The overall effect is that space has fallen across all categories. As some retailers have altered their business strategies, owners and developers have also downsized units, refurbished warehouse developments and turned them into retail parks. If, for example, B & Q is downsizing a 104,000 sq ft unit into a 60,000 sq. ft unit, the owner may have reconfigured the warehouse to create a terrace of units and has let space to retailers such as Next. This doesn’t affect vacancy rates but it does create a shift in occupiers and between retail warehousing to retail parks.
B & Q is still the main occupier of retail park space at 8.13 million sq ft but B & M has increased its retail park space to 2.46 million sq ft this year from 2.28 million sq ft last year. Smyths Toys, The Range and Poundland have all also significantly increased their retail park presence this year.
Trevor Wood adds, “We could be looking at vacancy rates of 6% in the near future which means the market is approaching saturation. Developers are still being cautious which means we are seeing plans for more refurbishments and extensions, rather than complete new builds. The risk is lower and the return on investments can be higher.”