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Home / Latest News / What does the future hold for the Welsh high street?

What does the future hold for the Welsh high street?

The future of retail in Wales is at a crucial point and serious thought is needed about how to revitalise town centres to make them both attractive and economical.

It was recently revealed that shop rents have plummeted by 70% in Cardiff.

Furthermore, recent figures from the Centre for Retail Research (CRR) suggested that almost a third of shops in Wales are at risk of closure in the next five years, and that Wales will suffer more than the rest of the UK due to an increase in online retail operations.

We are certainly seeing a major cultural shift in the retail market, with a decline in demand for physical retail space as people move towards more and more online shopping.

 This trend is set to continue. The CRR predicts that the share of online retail sales in the UK will rise from 12.7% (2012) to 21.5% by 2018; the highest online retail share in the world.

The reduced need for physical retail space will require businesses to operate smarter, and we are already seeing some change their structure by operating a mixture of “bricks and clicks” and offering both an offline and online presence, for example.

But as well as a contraction of physical retail space, what we could see is an increase in delivery and distribution centres, as demonstrated by businesses such as Amazon.

As Bill Grimsey pointed out recently in launching his review of the UK high street, finance is just one aspect of its struggles, and it is encouraging to see that his review will take a much broader approach to the retail market to include business rates, planning and the role of local authorities, as well as access to finance.

The Welsh Government has decided to follow the UK Government in postponing the next revaluation of business rates by two years.

This means that business rates will be stuck at April 2008, pre-recession values, until 2017.

Had the Welsh Government stuck to the original revaluation timetable of 2015, rates would have decreased significantly – potentially by around 25-30% – in comparison to the 2010 revaluation. This was a real missed opportunity for the Welsh Government to set its own path and support Welsh retail businesses.

Empty shops are another major issue in Wales. The latest British Retail Consortium figures from May this year show that one in five shops in Wales is currently empty.

A significant proportion of former retail premises on Welsh high streets is occupied by charities that are under threat from proposals for a reduction in rate relief as a result of an independent Welsh Government review into business rates for charities.

 The Charity Retail Association predicts that this could cause almost 20% of Wales’ charity shops to close, resulting in a further decrease in footfall, and accelerating the prospect of a bleak and empty high street.

Coupled with high business rates, the way retail rents are currently determined on a zone A basis, with landlords seeking to keep these as high as possible to protect values, irrespective of the retailer’s ability to sustain the same in all but the short term, does not help.

A more sensible system, particularly in secondary and tertiary retail locations, would be for tenants to pay a turnover rent; where rent is set at a percentage of the tenant’s turnover.

Turnover rents are already the norm in airport shopping malls, so why not roll them out to the wider retail market? Landlords would no longer feel obliged to manoeuvre to protect artificially-high Zone A values, and could benefit from automatic annual increases in rental income as the retailer grows.

 For tenants this system would provide the security of a predictable and affordable capped annual cost fixed to the success of their business.

The CRR figures paint a dismal picture, but it’s not all doom and gloom for the Welsh high street. There will always be a demand for prime destination shopping areas which encompass both retail

and leisure, such as Cardiff’s St David’s.

However. what we will see is more polarisation between these and the more secondary and tertiary locations.

In many cases, we will see large segments of secondary and tertiary retail locations disappear altogether, putting them at risk of becoming desolate “ghost towns”.

 In these cases, a proactive strategy is needed to revitalise town centres, high streets and other former retail locations by redeveloping for alternative uses.

England is already a step ahead of Wales on this; detailed changes have now come into force in England including plans to allow for change of use of certain buildings without the need for planning permission. This is a positive step by the UK government to address delays associated with the mainstream planning process, thus stimulating economic growth.

To stimulate the sector, the Welsh Government could follow Westminster by relaxing planning regulations to allow change of use from retail to residential, for example. This could feed a growing demand for city and town centre living and open up opportunities for service-focused businesses.

Subsidy, grants and funds won’t stimulate a retail market that is going through arguably its biggest state of flux.

The likelihood is that the Welsh high street of the future will encompass a much more mixed model including retail, office and residential.

What we need from the Welsh Government is effective policy that addresses a cumbersome planning system to ensure that Wales is not left behind in achieving this.

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