There are a number of significant changes afoot in the retail marketplace.
Greg Shutt, associate and agency expert at the Birmingham office of national property consultants Bruton Knowles, explains: “For the first time in 20 years retailer investment in property in town centres has exceeded that in out-of-town/edge-of-town retail locations, due to restrictive government planning policies which have virtually stopped new out-of-town developments.” Consequently, the high street independent faces much tougher competition from larger multiples.
These competitors also come armed with the buying power, legal teams and property specialists of a group, making it difficult for any independent retailer trying to stay on the high street. It is getting more expensive to locate on the high street due to upward-only rent reviews that drive costs ever higher when there is so much competition. On average a small retailer’s rent now represents between seven-10 per cent of sales (compared to multiples, averaging around three per cent).
Another problem comes through the fact that out-of-town and edge-of-town locations are often less supportive of independent retailers. Typical unit sizes on modern out-of-town developments tend to preclude most small retailers as developers prefer high-profile brand names who are seen as secure tenants. Older out-of-town locations or ‘mall’ style opportunities on supermarket sites can offer suitable units but, because they often boast a supposedly captive audience and provide amenities such as parking and direct public transport, they can be expensive.
However, Knowles believes these pressures may soon undergo a sea-change. A government-commissioned report on planning, recently produced by economist Kate Barker, has advised the government to drop some restrictive policies on out-of-town retail development. If this is delivered then some balance could return to the market with more multiples pursuing more out-of-town locations, taking some pressure off high street independents.
Deciding whether to move must be based on realistic analysis of costs and benefits of a location. It will depend on whether this is a new retail enterprise, a downsizing exercise or an expansion. For example, for a new enterprise without a loyal customer base, a high-profile location may be an important investment in attracting footfall. A business relocating to cut costs must be very realistic about moving costs, which always turn out higher than anticipated, and the viability of trade in a new location versus the benefit of lower rent has to be taken into account.
In addition to footfall and customer appeal there are some key factors to consider: amenities (parking, traffic restrictions, deliveries, public transport, street lighting); competitor impact (the nature of neighbouring businesses, whether a cluster of similar businesses will benefit you); crime and vandalism (security of premises, local policing initiatives, experience of neighbouring retailers); tenure of the premises (freehold or leasehold, if leasehold what length of lease is available, what other obligations can you include within the lease ¬ fully repairing or internally repairing lease, additional charges, shared areas of responsibility); and other costs (rates, utilities, associated costs like parking permits).
Anyone considering relocating should consider appointing a qualified surveyor to fight their corner. This will give them an expert who knows local issues, rents and planning policy, and represents a good investment at about £5,000 on a £25,000 per annum lease.
For retailers, relocating is extremely commercially sensitive: every shopping day you are closed is trade lost, so meticulous planning is essential. The earlier you arrange the stop and start of services from utilities to post, the better the window that you can work in. The negotiation of the lease and final completion of the legal paperwork will define your timetable but you can have suppliers on standby before confirming final details.
Equally, source specialist services like shop-fitting well in advance - even with a vague initial timetable. Do not forget any obligations you have on your current premises such as dilapidations (the repair of premises when you quit). So make final repairs to avoid a bill from your landlord.
Publicise the move. A move that isn’t clearly and repeatedly communicated to existing and new customers can do real damage. Plan for changes of contact information on the web, in key directories and in local media and repeat your efforts.
If you are responsible for dilapidations draw up or have a surveyor draw up a schedule of condition to be shared with your landlord. As well as planning the move, budget tightly for it, including any additional costs at your new premises, allowing for some decline in trading for the first quarter. Some retailers assume that more expensive premises will automatically deliver an increase in trade and budget accordingly. Avoid this, as even the most successful independents face some fall-off while old and new customers adjust.
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