What’s going on:
Over the past five years, 6,000 retail outlets in the U.K. have shuttered, according to BE News. The data stems from the British Retail Consortium (BRC) and Local Data Company (LDC), where experts cite business rates and the impacts of the covid-19 pandemic as two major factors.
The overall retail vacancy rate has risen to 13.9% in the second quarter of this year. The data reveals high street shops experienced a slight increase in vacancies in Q2, while vacancies in shopping centers remained somewhat unchanged. The BRC and LDC anticipate a gradual increase in vacancies, without any substantial improvements in the near future.
Why it matters:
Commercial real estate industry in U.K. is feeling the economic pressures of rising interest rates and the rise of hybrid/remote work. The rising closures and high vacancy rates are reflective of these trends, which are likely to impact local economies in the future — particularly in those cities most affected.
How it’ll impact the future:
The concerning economic trend could spark the need for government intervention, prompting the review of the business rates system in order to help revitalize high streets and town centers.
The ongoing challenges in the U.K.’s retail sector will likely lead to more job losses as businesses in retail areas are major economic employers. Retail workers negatively impacted by these trends may need to adapt to more digitally-oriented roles.
As return to office rates lag behind pre-pandemic levels, and inflation remains high, the physical commercial real estate landscape is likely to continue experiencing changes. Vacant retail spaces could potentially be repurposed for different uses, such as remote workspaces or community centers.