A weighty public sector has helped to protect Northern Ireland from the worst effects of a UK retail shake-up which has seen major recent casualties, commercial property experts Colliers International, which has a key regional office in Belfast, said today (Wednesday 27th June 2018).
However, it also warned that retail property transactions which had been relatively strong in the latter half of 2017, had slowed considerably since January, caused in part by continued uncertainty around Brexit in an increasingly dynamic retail environment and the lack of a functioning local executive.
In its annual Midsummer Retail Review, to be published on Friday, Colliers said Northern Ireland’s retail landscape was changing fast and that the outlook was becoming more difficult to predict in a market where Company Voluntary Arrangements (CVAs) were increasingly being used.
CVAs help troubled retailers to stay in business by allowing them to negotiate lower rents or other concessions. However, their use has been criticised for creating less transparency in the market.
“Since January 2018, there has been limited transactional activity and perhaps further investment will be based on the reformation of the Northern Ireland Executive and signs of certainty following Brexit,” Jonathan Millar, Head of Colliers International in Belfast, said.
“The public sector is certainly one of the less volatile parts of the economy and is a highly relevant factor when looking at a location’s ability to withstand turbulence in the retail market.”
In Belfast alone, around a third of employment is linked to public sector activity, significantly higher than the UK average of 25 percent and 21 percent in London.
Millar also said that while it was positive that Northern Ireland had kept itself clear of the House of Fraser and M&S store closure lists, with the latter adding stores in two new locations, challenges – including the growth of internet sales – remained.
Out-of-town retail interest remains strong, Colliers said, with a steady flow of new openings led by Lidl NI, The Range, Home Bargains and EZ Living supporting regional activity, while in Belfast, transactions in the leisure, food and retail sector continue apace.
Colliers said that in the last 12 months, around £340 million worth of real estate was traded in Northern Ireland and that retail, through 28 transactions, accounted for around 70% of investments made.
“Retail is evolving at a rapid rate and those quick enough to adapt will see satisfactory financial results,” Millar said.
Looking forward, Colliers said major changes needed to be made to secure the retail sector’s future growth in the face of online challenges to maintain its relevance and dynamism and it has put forward a detailed five-point plan designed to help revive its fortunes.
Its five-point plan includes the introduction of standard five-year leases, rent payments based on turnover, mutually-agreed breakout clauses which are based on turnover thresholds and the use of more incentives including rent-free periods.
Colliers also said retailers could be supported more with a ‘white box’ approach to fit-outs, where a basic unit is made available to help minimise initial costs.
“The five-point plan is aimed at helping retailers access viable trading space, while at the same time enabling retailers, landlords and investors to find occupiers for the rising number of empty units across our towns and cities,” Jonathan Millar said.
Colliers’ Retail Agency Director, Dan Simms, added: “We understand the inordinate pressures that retailers are currently facing as long-term structural changes to the retail market play out. But retailers, landlords and investors face equal challenges and the way forward has to be an equitable approach which respects the situations of both.
“The property industry now needs to think about a radical reshaping of the lease model, to support these retailers and we believe these proposals present a workable solution.”
Colliers International will publish its annual Midsummer Retail Report on Friday 29th June 2018.