The latest Business Outlook from estate agency Christie + Co reveals a fall in retail property value by 1.0% in 2013, but the market is busy, and there are plenty of areas of interest for retailers.
Much like homeowners, retailers are always keen to know how much their property is worth. Of course, this is always down to supply and demand to a certain degree, and even in difficult business conditions there will always be willing buyers for good outlets in busy areas. It’s not been an easy period for property values. Since the recession sunk its claws into the foundations of buildings, adding value has not come easy, but the message from Christie + Co is that opportunities remains.
Specifically looking at the retail market are the value of properties was -1.0% in 2013 compared with 2012, when prices were -0.9%. You have to go all the way back to 2010 to find a year when prices increased year-on-year. What does that mean overall though? Well, it doesn’t mean that the market is stagnant. There were 1,619 retail business inspections conducted for sale or valuation last year – though remember this includes all facets of retail. There were 2,527 viewings and an average of 6.4 offers per business. As for the trends that are driving change in the retail landscape, there’s no real shockers. The increasing number of discounters, multiples moving into convenience and the continuing demise of the high street are all cited as being major factors, though another stands out, at least for being less predictable.
Christie indicates that the growing share of fuel sales going to supermarkets leaves the future of independent dealerships “in question”. Steve Rodell, Director and Head of Retail at Christie + Co, says: “Not for the first time, fuel and petrol forecourt businesses grabbed the headlines, with the future of the independent fuel retailers (dealers) in question. The shift in fuel volume share to the supermarkets (described as a ‘massacre’ of independent retailers by Petrol Retailers Association chairman Brian Madderson), saw dealer volumes down to 1.8 million litres per annum per site, compared to 12m litres for supermarkets.
Not only did this signal that dealers were being overtaken by the supermarkets, but it also raised serious questions about fuel resilience in many UK regions. The report also noted that the continuing disposal of forecourts by oil companies looking to concentrate on the supply-side created many opportunities for dealers. However for every 50 new forecourts opened each year, 40 are opened by the supermarkets. The report also points out how similar pressures apply to independent convenience retailers. “As a consequence of intense competition from discounters including the likes of Aldi, Lidl and 99p Stores, the grocers have shifted focus onto convenience as a channel to deliver click and collect strategy and enhanced profits,” says the report. Steve Rodell says: “Convenience retailers seeking stores of around 2,000 sq ft, will certainly not be lacking options, but finding sites and purchasing them are two very different matters.
Much will depend on the strength of the location, rent expectation of the landlord and whether the landlord requires a strong covenant that a multiple can offer.” Christies points out that retailers are continuing to be frustrated by the delay in the business rates revaluation with many traders finding themselves stuck with business rates based on pre-recession rents hindering the ability or desire to invest in sites.
Moving our thoughts to 2014 and Christie predicts that symbols will grow, that discounters will increase their share of the grocery market, that oil company forecourt disposals will increase in quality, and that post offices are likely to migrate from stand alone units into larger stores. One prediction that stands out is that there will be growing demand for pubs (particularly those where leases are coming to an end) being converted into retail outlets. This is ripe ground for convenience stores, especially in small towns where the number of pubs is shrinking.