The high street is poised for recovery - but the top and bottom ends of the market will benefit most. That's the conclusion of this year's Midsummer Retail Report, a widely-read annual survey of retail property by brokerage Colliers. It argues that Britain's average vacancy rate will fall from 12 per cent back to 6 per cent by 2020, driven largely by population growth. But it expects pan-regional centres and small high streets to perform much better than medium-sized towns or second-tier city malls.
Retail rents have been falling for half a decade and are now 26 per cent lower than in 2008, on average, adjusting for inflation. Last year rents only fell 0.9 per cent in cash terms, but that masked big divergences - and not just between London (up 3.4 per cent) and elsewhere (down 3.6 per cent). Tellingly, the worst declines were in ex-industrial regional satellite towns such as Newport, Nuneaton and Stockport.
This hollowing out of the market can be traced back to the needs of retailers currently seeking space. On the one hand, some big US retailers such as Apple, Hollister and Victoria's Secret are expanding - but typically only in 20 to 50 top shopping destinations that complement a strong online business. On the other hand, pound shops, cafés and supermarket convenience stores are taking units on small, local high streets. Because these never attracted the national fashion chains and their 'prime' rents in the boom years, they have proved more resilient.
Retail development has long been on ice; the opening of Westfield (au:WDC) Stratford City in 2011 and Land Securities' (LAND) Trinity Leeds in March stand out as rare exceptions. Separate research by CBRE, another broker, suggests these conditions are now easing. "The largest development surge in a generation" is under way in London, it reports, while anchor store deals - a precursor to construction - have been signed in Glasgow, Leeds, Oxford, Bracknell and Bradford.
