Slowly but surely high streets across the UK are being decimated by the online retail sector. Once buoyant busy streets are now desolate, many shops empty and unlikely to find new retail tenants in the short to medium term. There are serious concerns that the high street we know and love from years ago has gone forever, never to return. So, will buoyant high street every return?
The main problem for the UK high street is laid bare when comparing the base cost of physical shops against those of virtual online outlets. The cost of upkeep as well as rent is limiting promotions and cost reductions which would make physical shops more competitive. Recently, we have seen an array of UK shopping giants looking to reorganise their property portfolios, reduce rents and in many cases reduce the number of shops.
There is also the problem of business rates which just adds to the already growing burden of running a physical shop on the high street. Over the last decade there have been numerous calls to reduce/eliminate business rates which are effectively increasing the rate at which our high streets are disappearing. It seems that many local governments do not understand the fact that reducing business rates would see savings reintroduced into the business arena to the benefit of the local community. A prosperous high street has historically been central to many villages, towns and cities and success has in the past bred success.
What began as a trickle of shops closing on high streets across the UK has very quickly grown into a tidal wave. The more active shops on the high street the greater the footfall and the greater the benefit spread across the whole retail community. However, when you see giants such as House of Fraser, Marks & Spencer and British Home Stores, to mention just a few, struggling, that says everything. Many high streets today are dominated by charity shops, food outlets and bookmakers who all cater for a very different area of the retail market.
There is no doubt that high street properties are nowhere near as lucrative as they have been in years gone by. Rental yields are under pressure and capital values are difficult to sustain which has seen many shops converted into residential property. This in itself will help to alleviate the housing problem in the UK, with demand greater than supply in the rental market, but once shops have gone, they have gone.
On the flipside of the coin, the exponential growth in online retail has created a huge demand for associated office and storage facilities. Many relatively small online retailers only require storage facilities and a relatively small office to fulfil their duties. This is a trend which is likely to continue as competition online heaps yet further pressure on off-line retail outlets.
It is safe to say that the high street that we have known from years gone by is dying. Footfall across even the busiest of high streets has fallen dramatically over the last 10 years. The opportunity to shop online 24/7 is appealing to more and more people and this trend is likely to continue. The switch from retail premises to residential premises is, and will continue to, changing the face of high streets across the UK. Will we get to a situation where walking into a physical shop will become a niche market?