31
Retail floorspace: what do the facts tell us? Andrew Smith May 2008
Retail floorspace:what do the facts tell us?
Andrew Smith
May 2008
Retail floorspace: what do the facts tell us?1
Agenda
+ Forces for change in retailing
+ Implications for planning
+ National trends
+ Local issues
+ Some policy challenges
Retail floorspace: what do the facts tell us?2
Retail issues: the forces for change
+ Goods price deflation
+ On-line revolution
+ The out-of-town ‘high street’
+ The rise of the one-stop grocer
+ Changing face of neighbourhood shopping
Retail floorspace: what do the facts tell us?3
Implications
+ Winners and losers from ferociously competitive trading conditions- Winners: Best supermarkets, ‘value’ retailers and on-line retailers- Losers: Generalists; dull fashion; furniture; electricals; music and video
+ In-store sales growth set to lag floorspace growth
+ Need to better measure and understand floorspace and sales trends
+ Policy imperatives:- Promote the development of efficient, modern town centre units- Recognise the forces for change in retailing: promote the benefits and manage the
consequences- Understand and plan for regional shopping hierarchies- Develop improved data on floorspace, sales and non-store retailing
Retail floorspace: what do the facts tell us?4
Little slowdown in floorspace growth
Source: Goodman, PMA
0
200
400
600
800
1000
1200
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Ret
ail s
pace
(mill
sq
ft)
Town centre Retail warehouses Supermarkets
Forecast
Retail floorspace: what do the facts tell us?5
High street deflation has been persistent
Source: Reuters EcoWin, Goodman
80
90
100
110
120
130
140
150
160
1997 1999 2001 2003 2005 2007
Inde
x (D
ec-9
7 =
100)
Non-food goods (ex-fuel) Food Retail services
Retail floorspace: what do the facts tell us?6
Sales densities are under downward pressure
Source: Goodman and Verdict
0
50
100
150
200
250
300
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Sal
es d
ensi
ty (£
psf)
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Gro
wth
rate
(% y
ear o
n ye
ar)
Sales density
Growth rate
Retail floorspace: what do the facts tell us?7
Retailer casualties
Retail floorspace: what do the facts tell us?8
Vacancy rates are accelerating
Source: IPD Monthly Index, Goodman
0
1
2
3
4
5
6
7
8
Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Vaca
ncy
rate
(%)
Retail floorspace: what do the facts tell us?9
Lease lengths are shortening
0
5
10
15
20
25
1999 2007
Ave
rage
new
leas
e le
ngth
(yea
rs)
High street Retail warehouse
Source: IPD, Goodman
Retail floorspace: what do the facts tell us?10
Grocers’ non-food sales are still growing strongly
Source:Verdict, Goodman
0 50 100 150
Clothing andFootwear
Electricals
Health and Beauty
Homewares
Music & Video
Change 2001-6 (%)
GrocersAll retailers
Retail floorspace: what do the facts tell us?11
The rise of the chameleon retailer
Express (up to 3,000 sq. ft.)
Metro (approx. 7,000-15,000 sq. ft.)
Superstore (approx. 20,000-50,000 sq. ft.)
Extra (approx. 60,000 sq. ft. and above)
Homeplus (35,000-50,000 sq. ft.)
Retail floorspace: what do the facts tell us?12
Services as well as goods
Retail floorspace: what do the facts tell us?13
Competition is rife
Source: Verdict
84.3
87.5
82.6
86.7
82.3
% of customers shared with other
food stores
2007
86.1
90.3
84.2
86.6
83.1
% of customers shared with other
food stores
2002
-1.3Average
-2.8Morrisons
-1.6Asda
0.0Sainsbury
-0.8Tesco
Five year change
(2002 -2007)
% points
Retail floorspace: what do the facts tell us?14
Current retailer mix across the hierarchy
Source: Experian Goad 2008, Goodman
0% 20% 40% 60% 80% 100%
Major City
Major Regional
Regional
Sub-Regional
Major District
District
Minor District
Local
All centres
Share of total floorspace
Comparison Convenience Service Vacant
Retail floorspace: what do the facts tell us?15
Changes in the mix 2005-8
Source: Experian Goad 2008, Goodman
-2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
Major City
Major Regional
Regional
Sub-Regional
Major District
District
Minor District
Local
Change 2005-8
ComparisonConvenienceServiceVacant
Retail floorspace: what do the facts tell us?16
How dominant are the multiples?
Source: Experian Goad 2008, Goodman
0% 20% 40% 60% 80% 100%
Major City
Major Regional
Regional
Sub-Regional
Major District
District
Minor District
Local
All centres
Share of total floorspaceMultiples Independents
Retail floorspace: what do the facts tell us?17
0% 10% 20% 30% 40% 50% 60%
Major city
Major regional
Regional
Sub-regional
Major district
District
Minor district
Local
Ratio of independents to total floorspace
2003
2008
How are independent retailers faring?
Source: Experian Goad 2008, Goodman
Retail floorspace: what do the facts tell us?18
Revival of the independent retailer?
Retail floorspace: what do the facts tell us?19
The out-of-town honeymoon is over for investors
Source: IPD Monthly Index, March 2008, Goodman
Rental value growth
-2
0
2
4
6
8
Mar
-05
Jun-
05
Sep
-05
Dec
-05
Mar
-06
Jun-
06
Sep
-06
Dec
-06
Mar
-07
Jun-
07
Sep
-07
Dec
-07
Mar
-08
3 m
onth
cha
nge
annu
alis
ed (%
)
All Property Standard shop Retail w arehouse
Retail floorspace: what do the facts tell us?20
In-town and out-of-town rental cost comparisons
Source: Goodman
Note: Town centre rents adjusted for zoning
0%
20%
40%
60%
80%
100%
Q4 91 Q4 93 Q4 95 Q4 97 Q4 99 Q4 01 Q4 03 Q4 05 Q4 07Aver
age
'ope
n A1
' ret
ail p
ark
rent
as
% o
f cor
resp
ondi
ng to
wn
cent
re
Retail floorspace: what do the facts tell us?21
90
100
110
120
130
140
150
Dec-00 Sep-02 Jun-04 Mar-06 Dec-07
Ren
tal v
alue
inde
x (Q
4 00
= 1
00)
Standard shopsShopping centresRetail parksFashion parksOther retail warehousesSupermarkets
Relative change in rental levels 2000-08
Source: IPD, Goodman
Retail floorspace: what do the facts tell us?22
Recent rental growth by town status
Source: Goodman
0 2 4 6 8 10
Major City
Major Regional
Regional
Sub-Regional
Major District
District
Minor District
Local
Change Q1 06 to Q1 08 (%)
Retail floorspace: what do the facts tell us?23
Town centre rental growth: winners and losers
Source: Goodman
-10 0 10 20 30 40 50
LudlowRingwood
Walton-on-ThamesChesham
DorkingSale
London: Old Bond StGosport
MaidstoneCastleford
AirdrieKensington:
East KilbrideKilmarnock
Kirkcaldy
% change Q1 06-Q1 08
Retail floorspace: what do the facts tell us?24
Richmond Upon Thames
Kingston-Upon-Thames
Bracknell
Maidenhead
St AlbansWoking
Redhill
Tunbridge Wells
Guildford
Dartford
Croydon
Hertford
Winchester
Staines
Maidstone
Bath
Cannock
Dalston
Peckham
Trowbridge
Bury
Shrewsbury
Kettering
Cumbernauld
Hereford
Sheffield
Gateshead
Kilmarnock
Hanley
Kirkcaldy
Walsall
Rotherham
Mansfield
Bishop Auckland
Hartlepool
West Bromwich
Sutton-In-Ashfield
-15
-10
-5
0
5
10
15
20
25
30
35
40
20 25 30 35 40 45 50 55 60 65 70
ABC1 proportion (%)
Ren
tal g
row
th (%
)
Little evidence of a wealth effect
Source: Goodman, ONS
Retail floorspace: what do the facts tell us?25
Where is the institutional investment going?
Major city24%
Major regional
24%
Regional22%
Sub-regional
14%
Major district
3%
Minor district
2%
District2%
Local9%
Source: IPD, Goodman
-4% -2% 0% 2% 4%
Major City
Major Regional
Regional
Sub Regional
Major District
District
Minor District
Local
Change since 2001 (% points)Breakdown by value Q1 2008
Retail floorspace: what do the facts tell us?26
-20
-10
0
10
20
30
40
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03G
row
th (%
)
Prime Average
What makes for a successful town centre?
Rental value growth
Harlequin Centrephased opening
Source: IPD, Goodman
Old prime
Currentprime
‘Death ofthe highStreet’
Source: Property Market Analysis, Goodman
Watford
Retail floorspace: what do the facts tell us?27
0
20
40
60
80
100
120
Ren
tal v
alue
-40%
-20%
0%
20%
40%
60%
80%
5 ye
ar c
hang
e
ChangeYear 5Year 1
Rental growth effects from a moving pitchPrime rental values increase by 10%
Tertiary TertiaryPrimePrimeSource: Goodman
Retail floorspace: what do the facts tell us?28
Footfall effects on trading performance
Key attractors Pedestrian flows
Concentration: Hanley Dilution: Hull
Source: Property Market Analysis, Goodman
Retail floorspace: what do the facts tell us?29
Some policy challenges
Source: Goodman
‘Town centres first’vsPlanning for a mature out-of town retail hierarchy
vs
vs
vs
vs
vs
Limitations of current regional planning framework
Need to maintain accessibility and convenience
Need to promote employment
Creating oversupply
Maintaining an adequate supply of cheaper space for independents
Understanding and planning for regional shopping hierarchies
Reducing reliance on the car
Promoting the transfer of redundant space to other sustainable uses
Maintaining adequate competition and choice for retailers and customers
Harnessing the regenerating power of multiple retailers
Retail floorspace: what do the facts tell us?30
Disclaimer
This document is under no circumstances to be considered as an offer, or solicitation, to deal in the property market. Any research or analysis used in the preparation of this document has been procured by the Company for its own use and may have been acted on for its own purpose.The information contained herein, including any expressions of opinion or forecast have been obtained from or based upon sources believed by us to be reliable, but is not guaranteed as to accuracy or completeness. The information provided does not not constitute advice or a personal recommendation for which the duty of suitability would be owed by us, and you should seek your own advice as to the suitability of any investment matter mentioned herein.Readers should remember that the value of investments and any income from them may go down as well as up; they can be affected by exchange rate movements between currencies and it is possible that investors may not get back the full amount invested. Past performance is no guarantee of future performance.No part of this publication may be reproduced without prior approval.
