CBRE comment on HMV administration and the impact for the Retail sector

Jonathan De Mello, Head of Retail Consultancy at CBRE, commented: “It is a real shame that HMV have finally succumbed to administration, leaving 4,000 plus jobs at risk. Retail is one of the largest providers of employment in the UK, and this is yet another blow to the stuttering economic recovery, and another reason for the government to take action and review the grossly unbalanced business rates tax, to help ailing retailers.

“The collapse of HMV is the latest knock to the high street, which last year saw the most retail casualties in terms of major administrations and job losses since the demise of Woolworths and MFI in 2008. HMV’s failure, as was the case with a number of 2012 administrations, was down to the significant amount of debt they had taken on. HMV have managed to struggle on this far due to favourable credit terms, However, Like Jessops, the impact of e-commerce and pure-plays such as Amazon, and the same products being sold for cheaper in supermarkets, and digital downloading of media content – have collectively led to HMV’s inevitable demise.

“2013 is unlikely to be as bad as 2012 in terms of major retail administrations with very few similarly heavily indebted big names left on the high street. However, for every retail administration we have seen, there are many otherwise healthy retailers looking to downsize their store portfolios in all but the best retail centres, given changing consumer habits and the consequent redundancy of some of our high streets. Whilst retailers will come out of the current downturn leaner and meaner many high streets will remain in terminal decline, given this, retail vacancy rates will almost certainly rise this year.

“Convenience is still a driver of consumer spending, and there is room for one major media content provider on the high street, though in convenience oriented locations such as major transport hubs – airports and train stations – as opposed to prime retail units with prime rents to match. WHSmith have been extremely successful in repositioning themselves as just such a provider in major transport hubs, and though they certainly do not provide the breadth of media offer HMV did, there is now a significant opportunity for them to do so.”