Shop rents slump highlights ‘worst decline since 1990s’

Jun 18 2008 Holly Williams

SHOP rents are falling at their fastest rate in 15 years, according to a report that signals yet more gloom for the embattled retail sector.

A report by property consultancy Colliers CRE warned the high street is facing "the worst retail market since the early 1990s", with declining rents reflecting the tough conditions on the high street.

Retail rents dropped by 3.1% in the 12 months to May, on a "real terms" basis, when RPI inflation of 4.2% is taken into account – the largest annual fall since the mid- 1990s, said Colliers.

Its annual midsummer retail report also forecasts rents will fall by a further 15% to 20% in real terms over the next three years.

Dr Richard Doidge, director of research consultancy at Colliers, said: "We can see that performance in the sector has been very weak and in our view is likely to get worse."

Wales and the West Midlands have seen the steepest rent falls, while Greater London and the South saw rent rises almost at a standstill, said the report.

It added that the poorest performers were run-down high streets, small shopping centres and those with a high proportion of service firms, such as estate agents, banks, pubs and restaurants, as the consumer spending slowdown has hit that sector hard.

Newtownards, Ludlow, Hayes and Tamworth shopping centres saw prime rents fall by more than 10% since May last year, said Colliers.

But the report suggested some regions had so far held up well, with the North West and Yorkshire seeing rents increase during the past year.

The best performing shopping centre in the UK over the past 12 months has been High Wycombe, while cathedral cities and affluent market towns, such as Henley-on- Thames and Marlborough, are performing particularly well, according to the report. Central London also notched up a 1.7% rise in average prime rents and Colliers predicted the city’s shops should weather the rent pressures better than most areas.

Colliers said retail rental conditions on high streets and in shopping centres were unlikely to be worse than in the early 1990s, but the report will add to concerns amid mounting signs of trouble for the sector as the economy slows.

Retail experts at broker Citigroup cautioned earlier this week of a "brutal slowdown" this yearand next, with worse to come in 2009.

Retailers have suffered a torrid week on the stock market after Citi’s chilling report, and a raft of "sell" ratings slapped on firms from DIY to fashion stores.