Chain Store Retailers Seek Larger Stores In Fewer Locations
London, 4 September 2012 – The number of shops operated by chain retailers has decreased marginally but the net amount of space occupied continues to increase as the industry adapts to consumer demand for a more modern shopping experience, according to the latest research by global property advisor CBRE.
CBRE’s Chain Expansion Quarterly1 tracks the cumulative number of branches in chain store networks nationally. The results are based on comprehensive national branch listings supplied by Retail Locations, the leading industry database of UK chain operators. This has allowed, for the first time, chain expansion activity to be analysed on a branch-by-branch basis to isolate growth trends and to identify which parts of the market are growing and which are declining.
The total number of chain shop branches in Great Britain has declined by -0.16% since the end of 2011 - the first contraction since records began, with the decline largely caused by closures in the clothing and card shop sectors. Expanding chain store traders continue to acquire larger shop units though, with the net amount of space occupied by chain retailers continuing to increase, boosted by supermarket expansion activity.
CBRE currently expects to see net chain shop expansion during 2012 of just +0.5%, down from the long-run rate of 2%-3% p.a. Non-food merchandising by grocers and the entry of discounters has had a knock-on impact on niche-players, exacerbating the branch shakeout triggered by the private equity debt legacy and the expiry clusters resulting from shortening lease periods.
The number of bulky goods, service and comparison goods branches fell by -0.40%, -0.92% and -1.09% respectively. The decline in service branches such as travel agencies and banks is largely due to the growing influence of online services; however, there is little evidence, as yet, to suggest online shopping is impacting retail space demand on the tangible goods side, probably because the main growth area is ‘click and collect’, which is largely store dependent. The branch shakeout to date, mostly via administrations, is due to recession, not the Internet and will continue until there is a sustained upturn in consumer spending growth.
On the clothing side, if concessions are included, almost 20% of the increase in space occupied by retailers recorded since 2009 has been accounted for by additional in-store clothing outlets introduced by the supermarkets. The recent dent in clothing store numbers caused by Peacocks and La Senza closures has consequently had little impact on the overall store footage gains. Non-food merchandising by grocers has inevitably impacted on certain niche non-food retailers (particularly clothing), exacerbating the general pressures growing out of the economic downturn, with new market entrants increasing the pressure on tired brands.
Jonathan De Mello, Head of Retail Consultancy, CBRE, added:
“Shoppers are increasingly attracted to larger but more distant trading locations that offer a greater choice of retailers and a more modern shopping experience. This is leading retailers to rationalize their store portfolios, with many chain stores seeking larger units in fewer locations.
“A relatively small number of retail majors are now making most of the running in both branch expansion and internet related investment. Recessionary tail-chopping – the dumping of poor performing branches to boost short-term profitability - is further concentrating market share in the largest markets and among the strongest players, with leasing exceptionally strong in London but patchy in the provinces. Branch expansion totals are still set to end the year in positive territory, but the H1 2012 decline provides further evidence of the fragility of retail sector health.”
The number of convenience, catering and leisure branches grew by 1.01%, 2.93% and 0.98% respectively. Although starting from a relatively low base, the growing importance of catering and leisure activities within the overall shopping mix looks set to sustain higher than average branch growth in these sectors.
David Muslin, Director, UK Leisure, CBRE, commented:
“Catering continues to grow remarkably rapidly and is gradually taking on a core anchoring role in many shopping locations. Mixes without significant catering offers are now almost unthinkable. Leisure related branch numbers are also continuing to grow strongly, in part – as with catering – reflecting underlying changes in the nature of shopping activity generally.
“London is usually the first port of call for most new entrants and we are currently working with exciting brands like, Five Guy, Burger & Lobster and MEATliquor; however, strong regional trading locations - the major cities and the big out-of-town shopping locations - are also attracting a lot of demand - the resurgence of T.G.I. Friday’s and other operators such as Rossopomodoro, Prezzo, and Rocket are storming ahead, along with buffet operators like Jimmy’s World Grill & Bar.”