It's not all gloom and doom on high street

IT IS wrong to assume that the wave of retail administrations will mean swathes of empty floorspace in high streets and retail parks.

In fact, according to a major 2009 property predictions document by King Sturge, this is shopping time for the healthier – and usually older – retailers and those who have gone out of business were probably doomed anyway

King Sturge says occupier demand for liquidated retail floorspace is likely to come from a variety of sources, particularly the grocers (the Big 4, Iceland, Waitrose and the Co-op) and expansive non-food operators (e.g. Primark, TK Maxx, Wilkinsons).

Hide Ad
Hide Ad

However, opportunistic site acquisitions will prove tempting across the market, even to retailers pursuing a cautious approach to expansion.

A general rule of thumb with recessions was that older age groups tended to be affected first. More conservative, mass-market retailers (e.g. Marks & Spencer) tended to be the first to bear the brunt of a consumer downturn – but tended also to be the first to recover.

Younger consumers tended not to feel any economic pinch until much later. As a result, younger fashion operators (TopShop, New Look) fared well initially, although time eventually caught up with them.

The report continues: "There are four key areas – demand, scale, finances and competition. Of these, competition is the key one.

"Most retail businesses that will fail will do so on account of their own competitive and strategic shortcomings. In a benign market, these may not always be apparent, but in a downturn they are cruelly exposed."

King Sturge says there is a fundamental difference between the current recession and that of the early 1990s – the whole process of business recovery is now far more rigorous and there is now far greater representation (and scrutiny) from the private equity sector.

The report continues: "The boom – bust – disappear cycle is now largely defunct.

"These days it is rare for a retailer that goes into administration to simply fall by the wayside and its stores stand empty. A number of 'parachutes' are now available to avert the worst case scenario and the scale of the fall-out is likely to be far less severe than is being signalled."

Hide Ad
Hide Ad

The report adds that reports of mass migration from mainstream supermarkets to discounters such as Aldi and Lidl were overplayed.

For the discounters, this was their moment in the sun – they were expanding rapidly and gaining market share but at a rate no faster than in recent years.

The GVA Grimley take on the Scottish retail market is that, with inquiry levels falling, there is undoubtedly pressure on rents.

In its latest review of the Scottish property scene, it states that, while demand is holding steadier in prime pitches, units in secondary locations are harder to let and vacancies are certainly increasing.

It continues: "There is a growing fear that, if the Christmas trade deteriorates as expected, we will see more failures in the New Year with perhaps further big high street names disappearing following Woolworths and MFI going into administration. The decrease in VAT should have a positive impact although the extent of this impact is not likely to be huge."

Latest data suggests that, while all retail rents in Scotland were 0.7 per cent up at the end of the third quarter last year, growth has now ground to a halt.

In the last six months, Zone A rents stayed at 215 per square foot in Edinburgh, 250 in Glasgow and 170 in Aberdeen.

The report concludes: "As the recession deepens we expect average rents to fall during 2009 and into 2010."

Legal giant with eyes on property scene

Hide Ad
Hide Ad

EVERSHEDS, one of the world's largest law firms, has taken two floors totalling 2,815sqft in Melville Street, Edinburgh, for its first office in Scotland. It is manned by three ex-McGrigors partners and, in a clear indication that it has its sights set on the commercial property market, one of them is Michael Spence, who at McGrigors dealt with commercial property, property regeneration and property finance.

RECRUITMENT firm Hudson Global Resource has sub-let its 11,500sq ft office at Harbourside House in Commercial Street, Leith, to Lothian and Borders Police. Hobson has moved to Caledonian Exchange in Canning Street and the police had been looking for a temporary home while its police station in Leith Street is refurbished. Jones Lang LaSalle acted.

SAVILLS, acting on behalf of the co-owners of the property, has sold to Apex Hotels for 910,000 the 6,200sq ft Hailes House near Lanark Road in Edinburgh. Apex, represented by Graham & Sibbald, will use the building as its new corporate HQ.

GLASGOW'S Scot Sheridan has signed up Lowe Refrigeration, a Northern Ireland firm specialising in refrigeration equipment, for a ten-year lease for a 5,000sq ft unit at its Excelsior Park development in Wishaw. Lowe, paying 5.25 a sq ft, will move from Flemington Industrial Park in Motherwell.

THE EDI Group has bought for 1 million the former 10 B King's Haugh premises on Peffermill Industrial Estate in Edinburgh for conversion from retail to industrial use. Agent Ryden says it already has two interests in the units and EDI is looking for more industrial opportunities.

A MAJOR industrial deal by Colliers CRE – on behalf of a private developer client it has let a 38,000sq ft industrial unit at Righead Industrial Estate, Bellshill, to Rowan Timber on a five-year lease at 3.50 per sq ft. The property is a former Scottish Water depot with warehouse, offices and a secure yard.

ON BEHALF of Aviva Investors Pensions, Atisreal has let the last suite at Causewayside House in Causewayside, Edinburgh, to existing tenant the University of Edinburgh in order to meet the expanding role of Edina, the university's UK national academic data centre. Edina already occupies 9,621sq ft on the second floor of the refurbished office building and has taken a further 3,263sq ft on the first floor on a seven-year lease at 16.75 per sq ft.

• Send deals details to [email protected]