Demand for prime retail space drives rents higher

Scotland's key shopping destinations have seen rents increase amid evidence of a widening retail recovery but many smaller towns are continuing to fall behind, a major study today reveals.

The price of retail space in Glasgow city centre has jumped. Picture: John Devlin

Although overall average rents have barely moved over the past year, the price of retail space jumped 8 per cent in Glasgow city centre as major chains competed for space in Scotland’s most sought-after destination.

The Midsummer Retail Report from Colliers International showed Edinburgh also saw a 3 per cent rent gain although Perth was the standout performer of the 27 shopping locations surveyed with a 10 per cent rise.

John Duffy, director of in-town retail with Colliers in Scotland, said supply in Glasgow was struggling to keep up with demand even with new space being created.

“While many retail brands are very selective they will still pay top dollar for a prime destination,” he said.

Although Duffy said smaller high streets have stagnated or moved backwards in recent years as retailers head for larger, out-of-town destinations, he added that the decline largely came to an end over the last year, as cafes, convenience stores and new brands fill the gap. “We may now start to see a return to modest rental growth,” he predicted.

But Colliers also said the postponed business rates revaluation, which has left many businesses paying rates based on inflated 2008 prices for almost a decade, continues to plague retailers and property owners in Scotland.

Peter Muir, Colliers’ head of rating, said although businesses were looking forward to a reduction in their payments following the revaluation next year, a number of questions remain.

“The Scottish Government has still not published the outcome of its consultation on changes to the rates system, which concluded more than six months ago. This is now long overdue.”

The report found the worst performers in terms of falling rents were those caught in the “gravitational pull” of Glasgow and its big shopping centres and included Ayr, Cumbernauld, Greenock, Hamilton and Irvine. In terms of Scotland’s smaller cities, Colliers said the example set by Perth shows that small city centre shops “can be desirable if the right clientele can be attracted”.

But in Dundee, the vacancy rate has been consistently increasing since April 2014 and 18.7 per cent of units are now unoccupied. In Edinburgh, Colliers said the market for retail space is being distorted in the short term by plans to rebuild the St James Centre, which has left many occupiers seeking a temporary home.

Although a possible cut in interest rates to support the economy would boost the retail sector, some analysts see an interest rise to stabilise sterling as a possibility. Colliers said interest rate policy was the “key short-term threat to Scottish household spending and retail performance”.

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