A shopper in a retail store
Vacancy rates hold steady despite economic pressures. JOE RAEDLE/GETTY IMAGES NORTH AMERICA via AFP

Over the last five years, the UK retail industry has been battling with significant challenges, leading to the closure of 6,000 retailers.

The British Retail Consortium (BRC) has linked the closure increases to the burden of unmanageable business rates and the impact of the COVID-19 pandemic as the primary reasons.

Nevertheless, despite the prevailing woes of soaring inflation and a cost-of-living crisis affecting both retailers and consumers, the data reveals that the increase in retail vacancies has not been as catastrophic as many may have feared.

According to the latest BRC-LDC Vacancy Monitor report, the overall vacancy rate for Q2 2023 stands at 13.9 per cent, a marginal 0.1 percentage point higher than Q1, but surprisingly 0.1 percentage point lower than the same period last year.

Shopping Center vacancies were steady in Q2 2023, at 17.8 per cent, the same percentage as in Q1. High street vacancies rose to 13.9 per cent in Q2, 0.1 per cent higher than in Q1, while retail park vacancies declined to 8.1 per cent, a 0.6 percentage point decrease from Q1 2023. Retail parks continue to have the lowest vacancy rate of any retail site.

Examining the geographical distribution of vacancies, the regions of Greater London, the South East, and the East of England demonstrated the lowest vacancy rates. In contrast, the North East, Wales, and Scotland suffered from the highest rates of vacant retail spaces.

Helen Dickinson, CEO of the British Retail Consortium, commenting on the trend, said: "The past five years saw Britain lose 6,000 retail spaces, with crippling business rates and the impact of the COVID lockdowns a key part of decisions to close stores and think twice about new openings."

She stated that the North and Midlands continue to bear the brunt of empty storefronts, while London showed signs of improvement in the last quarter. The capital's positive shift was attributed to the opening of new flagship stores, an influx of office workers, and an increasing number of visitors returning to the city.

According to Dickinson, the government should review the current broken business rates system to inject vitality into high streets and town centres and prevent further store closures. Currently, she noted that an additional £400 million will be added to retailers' invoices in April, putting a damper on the critical investment that our towns and cities require.

Furthermore, Dickinson welcomed the government's recent announcement about making it easier for vacant units to change their use. However, she cautioned against leaving gap-toothed high streets, which could cease being customer destinations and risk becoming economically unviable. Dickinson called for the government to go one step further and freeze interest rates in the following year.

Also sharing her insights, Lucy Stainton, Commercial Director at Local Data Company (LDC), stated: "The headline findings from Q2 are unlikely to have surprised anyone, with economic pressure from rising interest rates and inflation already mounting as the year began."

She noted that current corporate issues have been exacerbated by a reduction in discretionary spending and a drop in consumer confidence. The headline-grabbing economic challenges have crept into the data, resulting in a modest increase in the total vacancy rate, she added.

She drew attention to the mounting challenges faced by small and independent businesses, which struggle to cope with escalating operating costs on high streets due to rising rents and intensifying competition. Also, she pointed out that vacancy has reached critical levels across all location types, indicating an ever-increasing need to renovate units to breathe new life into retail destinations.

While acknowledging the lack of clarity on improving vacancy rates in the near future, Stainton remained cautiously optimistic, pointing out that recent vacancy increases had been minor. As a result, she believed that any future increases would likely remain moderate, offering a glimmer of hope amidst the current stormy economic conditions.