UK high street retail rents could fall by as much as 20 percent over the next three years after suffering their biggest decline in real terms since the early 1990s.
A report by real estate consultancy firm Colliers CRE today warned that despite an average 1.1 percent increase in prime rents over the past 12 months, when inflation was taken into account, high street retail shop and shopping center rents actually fell by 3.1 percent each.
Over the next three years, that could translate into a real terms fall of between 15 and 20 percent, the firm’s Midsummer Retail Report said.
Dr Richard Doidge, director of research, said removing inflation from the rent figures painted a “clearer picture” of the problems facing the retail sector adding that performance has been weak and was “likely to become worse.”
The credit dislocation and the slowdown in the UK property market was also impacting developers, according to Colliers, who said a lack of “occupation demand” was forcing development companies to let construction timelines slip.
In 2006, 15 million square feet of retail space was slated for completion this year, however forecasts now suggest only eight million square feet will come online.
Greg Styles, head of retail, said commitment for space from retailers often came at a late stage, adding: “This lack of occupational demand is causing some developers to let completion dates for new shopping centers slip as pre-letting thresholds are being achieved too late to hit target start dates.”
The report says UK out-of-town retail parks were set to fare better than high streets and certain shopping centers, although retail properties in supply-constrained towns and cities would still outperform the market. High streets with poor quality shops, a lack of big store names and those filled with service sector industries could be some of the hardest hit.