The number of shop branches held by chain stores in Great Britain has continued to rise in 2012 despite the recent spate of administrations, with restaurants, coffee shops and other catering outlets among the key drivers of growth, according to the latest research by global property advisor CBRE.
The total number of shop branches held by chain operators increased by 0.31% in the first quarter of 2012 (Q1 2012). The number of catering, leisure and retail branches increased by 1.78%, 0.87% and 0.31% respectively. The number of shop branches in service use (banks, building societies, travel agencies etc), however, fell by -0.41%.
Access to new national time-series data1 has allowed retail chain expansion activity in Great Britain, for the first time, to be analysed on a branch-by-branch basis for a period of more than a decade. The results reveal chain growth patterns that are quite different to those commonly assumed. The number of branches occupied by service operators has been falling since the 1990s, largely because of the capture of electronically transferrable business by the Internet. Catering, leisure and retail branch expansion – in sharp contrast – has continued to rise, however, even during the current downturn and despite the steady trickle of administrations.
Although starting from a relatively low base, the growing importance of catering and leisure activities within the overall shopping mix looks set to sustain higher than average branch growth in these sectors. Retail branch growth has meanwhile settled at circa 1% pa growth, down from the long-run rate of 2%-3% pa.
Seb Howard, Central London Leisure, CBRE, commented: “Catering demand continues to outperform other uses and shows every sign of continuing to do so in the future. London is a major magnet for new entrants with exciting brands like Burger & Lobster, Five Guys and MEATliquor emerging in the past year; however, strong regional trading locations – the major cities and the big out-of-town shopping locations – continue to attract a lot of demand, with the resurgence of T.G.I. Friday’s and other operators such as Prezzo, Rossopomodoro, and Rocket doing well, along with buffet operators like Jimmy’s World Grill & Bar.
“However, prime space availability is a growing problem, particularly in London. In common with retail, rents for the best catering space has continued to grow strongly during the downturn as a result. There are always change of use/licensing issues that restrict space availability. Issues, like extraction can prove major obstructions, while bringing space into catering use can sometimes be exceptionally difficult.”
Mark Teale, Head of Retail Research, CBRE, added: “Although the total number of shops occupied by chain retailers continues to grow, the rate of increase has slowed markedly since the onset of the 2007 downturn. The number of additional units taken on annually by chain retailers is now at barely a third of pre-downturn levels. Non-food merchandising by grocers and the entry of discounters has had a knock-on impact on niche-players, exacerbating the branch shakeout triggered by the private equity debt legacy. The shortening of lease periods, resulting in expiry clusters, is also exacerbating the shakeout.
“The continuing retrenchment of chain retailers into larger, higher productivity centres, including the modern out-of-town stock, looks now to be creating a permanent shift in shopping patterns. The longer the downturn continues, the greater the number of small High Streets that will cease to be viable shopping locations.”