Shop vacancy rate improves, but tough winter and rates rise loom

The overall shop vacancy rate in Britain decreased to 13.9 per cent in the third quarter of 2022, but the rise in business rates could put shops at risk, a new report has found.

The overall figure was 0.1 percentage points better than Q2 and 0.6 percentage points better than the same period last year, according to the BRC - Local Data Company Vacancy Monitor. This was the fourth consecutive quarter of falling vacancy rates.

All locations saw improvements in vacancy rates in Q3. Shopping centre vacancies fell to 18.8 per cent, down from 18.9 per cent in Q2 last year. High street vacancies decreased to 13.9 per cent, which was an improvement on 14.0 per cent in Q2. Retail Park vacancies decreased to 9.7 per cent in Q3, a 0.5 percentage point improvement from the previous year. Also, it remains the retail location with by far the lowest vacancy rate.

Geographically, London, South East and East of England had the lowest vacancy rates. The highest rates were in the North East, followed by Wales and the West Midlands.

“The overall shop vacancy rate improved for the fourth consecutive quarter; however, vacancies remain higher than pre-pandemic levels,” Helen Dickinson, chief executive of the British Retail Consortium (BRC), said.

“Some locations are benefitting from a pickup in tourism and a gradual return to offices, but levels of footfall are still below those of 2019. This gave some businesses the confidence to start investing, opening new stores around the country, especially in Retail Parks. But the North-South divide is again laid bare in these figures. While the North has seen some of the biggest improvements in openings over the last year, they still have some of the highest vacancy rates in the country, with one in five shops closed in the North East.

With the costs of operating in many towns and cities remains high, she said the demand will be tested by the fragile economy and falling consumer confidence in the lead up to Christmas.

“Higher costs are already pushing up prices and the industry faces a government imposed extra £800m business rates bill from April 2023. This will force many retailers to make tough decisions about whether to invest in new stores or close existing ones. Government should freeze business rates and reform the broken transitional relief system. This will support investment in communities across the country and help keep prices low for consumers.”

Lucy Stainton, commercial director at Local Data Company, added: “Our latest analysis of the physical retail and leisure market across GB as a whole shows a sustained level of recovery at a time when further economic headwinds have been well-documented. With a decrease in store closures compared to the same time last year, in parallel with an increase in openings, vacancy rates have continued to decline as we look to the end of 2022.

“The pandemic proved the final straw for a number of ailing retailers. The CVA and insolvency activity which typified the most challenged end of the market in the COVID years caused a significant spike in empty units, which are now slowly being reoccupied.

Stainton said the independent businesses in particular have continued to flourish as consumers remain loyal to their local high streets.

“However, we can’t ignore oncoming economic pressures as consumers face a winter of increased caution and reduced disposable income. Just as the market has started to find its feet, we are now about to face a new round of tests— but perhaps the lessons learned during the pandemic will help chains and independents to weather the coming storm. The latest GB figures are encouraging but should still be viewed with real caution, and we would predict that this increase in occupancy could slow as retail and hospitality businesses grapple with a tough winter,” she added.