If high-street landlords were hoping for a fresh start this January, they may already be disappointed. Though hardly unexpected, the collapse of two major retail chains within a week -
For two years, the average high-street vacancy rate has remained high, but stable at about 14.5 per cent, according to the Local Data Company (LDC) - up from less than 6 per cent in 2008. The rate fell marginally towards the end of last year, thanks to temporary lettings for Christmas and café conversions. But that improvement may since have unwound - LDC director Matthew Hopkinson estimates that about 1,000 stores have closed in the past four months. The collapse of Jessops was particularly brutal, with all 187 shops closing just two days after the camera retailer called in the administrators.
Of the three forces that since 2008 have undermined retail occupancy and, by extension, rents - the rise of e-commerce, weak retail sales and a development boom last decade - the first remains the most worrying. Nobody knows what share of the retail pie the internet will eventually take. A recent survey of its members by the British Council of Shopping Centres came up with an average guess of 25 per cent - Boston Consulting Group believes online sales will reach 23 per cent of the total by 2016. The latest official statistics, from November, put its current share at 10.8 per cent.
Whatever the retail industry's mature state, a consensus is building that the survivors will be those that seamlessly combine physical and virtual retailing. If digital pioneer John Lewis is any guide, they will need more distribution warehouses and fewer, larger shops, which will function partly as showrooms. Jones Lang LaSalle believes up to 20 per cent of UK shop space will become "surplus to modern retailing requirements".
Big shopping centres are better placed than small high streets to compete in this new world, but they too are realising the need for radical change.
CSC's new strategy gets full marks for boldness, but management still needs to address how it will fund its refurbishment pipeline, without which the rebrand will lack potency. Meanwhile, stick to high-street shop investments where the rent is already low and the tenant has a strong digital strategy or an internet-proof business model such as convenience shops or discounters.