Retail rent gap between the winners and losers widens

This year, UK retail sales fell at the fastest rate in seven years. Rising prices caused by the Brexit vote are thought to be to blame, although there is more to the retail sector’s well-documented woes than just inflation.

In Wales, the situation reflects what’s happening in other parts of the country but overall it is faring worse. Research by Colliers International found that since 2016, prime zone-A retail rents have increased in only five of the 21 Welsh towns and cities it tracks.

Wales recorded average prime rental growth of 3.1% but this was heavily influenced by new lettings at Friars Walk in Newport - the centre opened in late 2015 and has transformed the town - which took prime rental levels up by 150% from £30/sq ft to £75/sq ft.

The other winners are Haverfordwest, Caerphilly, Aberystwyth and Carmarthen, where retail rents increased by between 8% and 20%. There was no change in 10 of the locations while rents fell in six towns. Barry was the worst affected having seen a fall of 14% in a year.

“What’s happening here mirrors the rest of the UK in terms of there being a little bit of an increase in retail rents in some areas, stability in others, while in some towns it’s fallen away,” says Dan Simms, head of retail agency, south, at Colliers International.

“So far in 2017, there’s been a lot more movement at the top and bottom ends - the polarisation issue has kicked off again and the gap between the winners and losers is widening.”

Simms adds that in towns that have seen rental growth, it’s “a case of recovery play rather than making new ground”.

Newport is something of an anomaly. Its town centre had been in decline for 15 years and was, as Simms describes it, “completely broken”. Something radical had to be done, he says, crediting the bravery of the local authority, which took a lead in delivering Friars Walk shopping centre in a JV with Queensberry Real Estate, for turning its fortunes around.

“It’s a good example of what needs to be done and while some councils are making use of low lending rates and unconventional land acquisition to bring forward similar but far less radical regenerative schemes, it isn’t being done elsewhere in Wales.”

Whereas there are some notable schemes coming on stream in other areas of the UK, in Wales there is virtually nothing. Old unsuitable retail stock and offerings in secondary towns are driving people to the prime shopping centres, Cardiff in particular. This, combined with high-quality out-of-town retail destinations around places such as Swansea, is cannibalising town centre trade and compounding the problem.

“There are some successes, but there will be some more pain and failures in some towns and a gentle recovery in others,” says Simms.

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