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  • Overview

    The food and beverage sector has often been viewed as the darling of the retail property world but now the director of the Local Data Company, Matthew Hopkinson, has voiced concerns that the growth in this sector in the UK is unsustainable and huge closures are to be expected in the restaurant field in the next 15 months and also a decline in the supermarkets that have in recent years been constantly expanding, where he predicts a “bloodbath of competition with chances of cannibalisation” for those food retailers.

    In recent years there has been a dramatic change to the shape of retail not only in this country but across the globe. The rise of the internet is largely responsible with consumers being able to shop for everyday goods, be it groceries, electrical goods or fashion online by the click of a button. Most of us have enjoyed the enormous convenience that this has offered but it has meant that the shape of our high street and the need for commercial retail property has needed to adapt.

    Property investors seek to create destination shopping experiences with top end examples such as Westfield in London where every opportunity is taken to encourage shoppers to increase their dwell time.  Restaurateurs and cafés have been the perfect offering to help achieve these goals. Industry figures state that the British restaurant industry has grown by 39% since the last recession, with 14,000 more restaurants across Great Britain in the last five years. There has been a growth in the chains as well as new start-ups and smaller new chains.

    The supermarkets have likewise needed to adapt and for many years fewer large out of town stores were opening with the major players focusing on convenience stores. (However, Morrisons have recently sold this side of their business.) Towns and cities across the UK have seen the no longer commercially viable petrol service stations or public houses closing and food stores popping up in their place. Such growth has been great news for institutional investors and landlords with a retail portfolio with landlords in many towns currently enjoying fully let units. Both restaurants and supermarkets have traditionally taken longer and often less flexible leases than the other retailers. Bigger capital costs for restaurateurs to set up business means they need to commit to their sites and supermarkets can often be used as a strong anchor tenant as part of a redevelopment plan to bring new life to a secondary or tertiary retail scheme.

    Hopkinson is concerned that the bubble must burst, particularly outside the London bubble since the consumer’s disposable cash has not continued to grow at the same rate meaning that the new restaurants will struggle to remain profitable.

    The big UK supermarkets have been fighting against the German discounters and the price wars have been well documented in the press. There is recent speculation that this overcrowded market will also have to make room for more competition, such as Amazon Fresh. This is currently available in selected US cities and offers customers who pay a yearly subscription of $299 next day delivery of over 500,000 items.

    All of this is likely to impact further on our high street. Figures published in July 2015 indicate that footfall on the high street was down 2.8% on the same month of 2014 and down 2.4% at shopping centres, but rose 2.8% at retail parks. In 2014 987 shops disappeared from our high street according to a PWC report.  If Hopkinson is right the shopping centres are likely to follow suit. Business in all locations has changed with less travel agents and mobile phone providers yet seemingly unlimited café operators opening, and we as a firm act for a major coffee retailer franchisee who has just opened their 50th store in the south east alone.

    If the concerns of Hopkinson are well founded a new challenge remains for those seeking to create destinations and place making in the retail world as to whom will be the new occupier to attract to these units.

    If you would like to further dicusss any of the information detailed above, please contact Alisa Sweeny from our Commercial Property & Development team.

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