One in 10 shops lying empty is not necessarily negative for retailers
Bad news is, by definition, bad. However, one question that can be overlooked by investors is just who is it bad for? Take the recent headlines bemoaning the fact that, according to the latest figures from the British Retail Consortium, one in 10 shops on the UK high street now lies empty – the highest proportion since records began.
If we point out that those records only began in July 2011, it is not to play down the retail environment. Clearly times are hard on the high street but investors need to be careful about overly sensational headlines. Without a longer historical context, the worst number in not much more than a year may not necessarily be that bad.
A second point to note in this regard is that, with Comet, HMV and Blockbuster going into administration, the next British Retail Consortium survey is likely to reveal an even higher proportion of shops lying empty. Will the “worst since records began” headlines make another appearance? Are we going to see them wheeled out every month until the high street hits the bottom?
More importantly, as we mentioned at the start, just who is this actually bad news for? After all, there is a strong argument that one in 10 shops lying empty is in fact pretty good news for the surviving retailers as it means capacity has been taken out of the market and there should also be a lot of downward pressure on most businesses’ main cost – their rent.
People see headlines proclaiming how tough it is on the high street and assume it is bad news for retailers but that is as far as it goes. However, for property companies, the fact that one in 10 shops is empty is very bad news indeed.
Fund Manager, Equity Value
I joined Schroders in 2000 as an equity analyst with a focus on construction and building materials. In 2006, Nick Kirrage and I took over management of a fund that seeks to identify and exploit deeply out of favour investment opportunities. In 2010, Nick and I also took over management of the team's flagship UK value fund seeking to offer income and capital growth.
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