Retail property faces tough 2012
Published: 04 January, 2012
Retail property is in for major changes during 2012, according to new research from Jones Lang LaSalle
In its annual property forecasts the first since its merger with King Sturge Jones Lang LaSalle predicted that 2012 will be the year that long-term trends finally play out in the retail property market.
Head of retail Guy Grainger said: It's not just the economy that's affecting retail the sector is seeing structural change. And he warned the only in-town locations to survive unscathed would be central London and the top 20 regional destinations.
Two statistics sum up the challenge facing the industry: JLL calculates that 30 per cent of all retail stock is now redundant and needs to be recycled. But on a positive note this will present opportunities for foodstores, cinemas and residential to come back into the town centre.
And JLL research shows that 50 per cent of all retail leases expire between now and 2015, with half of those expiring in 2012 and 2013. And that includes some major chunks of retail retail real estate including schemes like Hammerson's West Quay in Southampton. Some retailers like Arcadia have already signalled their intention not to renew leases. And according to Grainger retailers like Dixons are only renewing if they can negotiate a flexible deal with the landlord, often involving a £1 headline rent with a turnover top-up.
Secondary locations are most at risk, according to JLL, and often landlords' concessions are not enough to convince retailers to stay. Because rateable values have not been revalued since 2008, in many towns rates payable now exceed the rent on a new letting.
But out-of-town the picture is brighter, and JLL forecast a surge in development activity as landlords redevelop second-generation retail parks built in the 1980s with new units to captalise on strong demand from high street retailers like Johgn Lerwis, Marks & Spencer and Debenhams.
