State of the retail nation 2011
Published: 30 June, 2011
The results are now in from the third State of the Retail Nation survey, Shopping Centre’s exclusive industry-wide survey, conducted by shopping centre research specialist Business Blueprints
The results again provide some mixed messages from the UK’s shopping centres. Paul Latimer, director of research at BBL says: “After the quite positive stories that came out of last year’s survey we have seen some causes for concern in this latest piece of research. While the number of voids appears to have stabilised, it is consumer confidence that appears to have sunk back to its 2009 levels after a more upbeat 2010.”
As in previous surveys, the researchers began by exploring the issues that centre managers felt had been their biggest challenges over the previous 12 months.
The findings for 2011 suggest that there are fewer single stand-out issues this year than previously. The most popular responses are perhaps not surprisingly ‘the recession’, ‘empty units/store closures’ and ‘footfall’.
Perhaps more significantly, more managers mentioned ‘footfall’ which came back as a challenge this year after fewer mentions in 2010, while more respondents made reference to ‘new retailers’ than before.
‘Service charge savings’ remains on the agenda but again fewer mentioned this than before, while ‘keeping tenants happy’ was up again as a topic compared to last year.
Looking to the future, the top three challenges for the forthcoming year were identified as ‘driving footfall’, ‘filling voids’ and ‘dealing with the economy’.
If we look back over all three surveys the most noteworthy trends are the increasing needs to ‘drive footfall’ and ‘dealing with the economy’, while ‘reducing the service charge’ and ‘cost control’ seem to have declined for this sample – perhaps reflecting the work that has already been done specifically in these areas over the more recent months.
In 2009 a little less than half (47 per cent) of all those surveyed had themselves received direct pressure from their own tenants to reduce their service charges. In 2010 the number fell to 41 per cent and this year the trend has continued with the proportion falling to below one-third (31 per cent).
For those who have been approached by their own retail partners to reduce service charges, the sorts of initiatives this year again show more diversity and again there are fewer stand-out issues.
The single most popular response will apparently be to ‘review/re-negotiate contracts’ but this is closely followed by ‘reviewing operating costs’, ‘managing/reducing expenditure’ and ‘delaying refurbishment/maintenance’. The most significant increase appears to be in ‘retailer awareness’.
Asked how their service charge compared this year against the previous 12 months, more than three-quarters suggested changes would be modest – i.e. a change of no more than 5 per cent either way, and the net impact of these movements sees an average overall fall in service charges of 1 per cent.
This result is actually identical to last year which itself had flattened since the 3 per cent average decline recorded back in 2009. At the extremes a minority is projecting increases of more than 10 per cent but no manager is projecting deeper cuts, i.e. reductions of over 10 per cent.
Once again respondents were asked to share their position on monthly rents. In 2010 more than six out of ten were considering these on a case-by-case basis, sharply up from only one-third back in 2009.
This year however sees the proportion doing so declining slightly, however for more than half of our sample this is their default position.
Elsewhere one fifth ‘already offer’ monthly rents, a similar level as in 2009, while similar numbers as before have ‘no intention of moving’ to this position, and, as in 2010 no one is considering making monthly rents the norm.
The average number of voids across our total sample was steady compared to last year at 6 per cent, which was itself an improvement from the 10 per cent we saw in 2009. As in 2010, the numeric range of responses was narrower than in 2009 with nowhere reporting voids above the 20 per cent level.
However the number of centres able to report a complete absence of voids was lower at only 4 per cent, down from 10 per cent in 2010 and 7 per cent in 2009.
The results from this year are also reflected in the question that compared voids year-on-year. Although only 15 per cent forecast status quo, larger numbers than last year perceive things to be either ‘a little better’ or ‘a little worse’.
Our weighted average using a 5-point scale was 3.3 in 2010 which was up from 2.5 in 2009, that is more positive but in reality quite neutral and our latest research suggests a very similar ‘neutral’ position in 2011.
Again, managers were asked for some predictions for the months ahead. Asked when they expected to see a turnaround in occupier demand, among those who had indicated things to be ‘a little’ or ‘a lot worse’ none felt that it was already happening this year. The biggest group believed it would take place by the end of 2011.
More than ever before the feeling is that improvements will come more slowly than previously expected, so the general picture appears to be one of a slower recovery than was perhaps foreseen in 2010.
We once again asked centre managers to rate current levels of consumer confidence. The overall picture painted seems to be one of less confidence than a year ago with more than half responding to this particular question with a ‘quite poor’ or ‘very poor’ answer.
Using a 5-point scale gives a near identical result to 2009 after the more positive result we saw in 2010. As in the previous two surveys we also asked for a prediction amongst those who felt that consumer confidence was either ‘quite poor’ or ‘very poor’ as to exactly when they felt they were likely to see a turnaround in confidence.
The outlook again appears to be less positive than in 2010 with few seeing this turnaround in consumer confidence happening this year and with the largest group believing that this will take place in the middle of next year, i.e. 2012.
A year ago this consumer recovery was felt to be on average nine months away, this year sees this increasing to more than 12 months away, again a position that looks a lot more like 2009.
For 2010 we also explored the potential impact of tax rises and public spending cuts. Almost all respondents felt that this would impact them to some extent.
Around one-in-five believe this impact would be ‘a lot’ and around two-thirds state they saw this as having ‘a little’ impact. Interestingly in 2011 the results are very similar but with ever more (27 per cent) believing that this will impact them significantly.
Business Blueprints’ Latimer concludes:“In summary it appears that centre managers are finding ways to adapting to conditions and while the malls themselves are holding up well there is a concern that shoppers are still undecided about their own personal circumstances and that it may be at least 2012 before we really start to see things picking up strongly.”
