It has been a tough couple of years for high street retail. Even before the COVID pandemic, retail in the UK was trending downward. From 2012 to 2017, high street retail shed thousands of jobs. Other than in London, the rest of the UK saw high street retail decline by some 2%. So where are we now? Is high street retail investment still worthwhile?
Investors looking to borrow to fund their investments in high street retail are struggling just as much as the industry itself. High interest rates are making it very difficult to invest if you don’t have the cash up front. This creates an additional problem for retailers who cannot make ends meet on their own but now cannot find investors to keep them afloat.
A Higher Cost of Living
We know that everything in retail hinges on consumers. Retail is built for them. It is designed to supply the products they need. Unfortunately, consumer spending is dictated by the overall cost of living. As it increases, consumers have less real income spend. This is what’s killing high street retail.
The UK is in the midst of a cost-of-living crisis right now. Individual consumers do not have enough money. They are not spending on high street, so retailers are out of money as well. If something doesn’t change quickly, the high street is going to look a lot different five years from now.
As you know, one of the chief problems is the cost of fuel. Domestic energy prices were up some 54% last April. Consumers were hit with another 80% this past October. It doesn’t seem to end, either. The Government has told consumers to expect another 20% increase come spring.
Retail Shops Are Closing
If you pay attention to this sort of thing, you know that retail shops are closing all over the UK. And it’s not just small-time players. Well-known names like Paperchase, Lloyd’s, and Wetherspoons are affected. No one is immune right now.
Retailers struggling to stay open are looking for creative ways to trim costs. For example, some are starting to close early to make up for lost traffic. They save money on overhead and labour, but fewer operating hours also makes it more difficult for customers who do want to buy. So it’s a no-win situation.
In short, things are not looking too good for high street retail right now. Prior to the pandemic though, investors were willing to step in and help out. Interest rates were low enough that they could afford to borrow. This is no longer the case. Higher interest rates preventing investors from getting involved is putting even more pressure on retailers.
We Are Still Buying
We wish we could say that good things are on the horizon for the high street. We cannot. Like anyone else, we don’t know how long the current economic crisis will last. But we can offer high street retailers this hope: we are still buying commercial properties. We are still looking at opportunities in the retail sector, opportunities we believe will be good for us in the long term.
We invite you to contact us to learn more about what we do. If you have a commercial property that you think we might be interested in, we are always willing to take a look. It might turn out that we are very interested in what you have.
In the meantime, high street retail is in for more tough times. There doesn’t seem to be a way out until inflation stabilizes, fuel prices fall, and interest rates are attractive enough to actually encourage borrowing.
