Real Estate Research

From (zone) A to Zombie: UK retail is not always the stuff of nightmares

We believe there is hope for the much-maligned UK high street. Whilst the retail property market  undeniably has areas of weakness, particularly outside of London, there are also pockets of growth.


Patrick Bone

Patrick Bone

Property Analyst

We believe there is hope for the much-maligned UK high street. Whilst the retail property market undeniably has areas of weakness, particularly outside of London, there are also pockets of growth. Schroders has developed a new classification to help identify these opportunities in town centres. Our approach moves away from traditional regionally-based allocation strategies towards a focus on the drivers of performance. Positioning portfolios towards growth in this way should drive returns and provide for better risk management.

Structural changes in consumer behaviour require a new perspective

The standard procedure when analysing the investment performance of the town centre sector is to aggregate locations along regional boundaries. However, consumer behaviour has changed dramatically over the latest economic cycle and the resilience of high streets across the UK to developments such as the increased use of e-commerce is varied. We believe this method is now too blunt a tool to capture the nuances of performance: the high streets of Hull and Harrogate are both in Yorkshire for example, but behave very differently.

Our classification aspires to capture this diversity by segmenting town centres based upon factors underpinning their growth. The drivers of rental growth, or perhaps more accurately rental decline,are varied at town level. Our analysis suggests that performance is not strongly correlated with the size of the local population; large cities and towns have recorded below average rental growth over the past three years. Instead, we look towards locations with a point of difference supporting a solid local economy that drives footfall. This could be the result of a niche occupier base (oil in Aberdeen, R&D in Cambridge), a wealthy catchment (the affluent suburb of Solihull or in the London commuter belt), or perhaps a tourist destination such as Cheltenham or York.

Cathedrals, clones and zombies: not just your average high street

Our analysis suggests that the UK’s high streets can be arranged into a hierarchy based on their
potential to outperform the average town centre, from robust London suburbs down to zombie towns (Table 1). Towards the top end of the hierarchy regional centres such as Bath, Cambridge and Guildford are characterised by having a strong tourist trade and a lack of big city competition that makes them defensive to the internet. The local populations are often relatively wealthy and like to shop in the pleasant environments of their local high streets. The bottom of the hierarchy is home to clone and zombie towns, such as Wolverhampton, Bangor and Wigan. Both groups will have high streets dominated by generic retailers, above average vacancy rates and limited population growth. However, whilst clone towns still function as viable shopping locations, the high streets of zombie towns are often in terminal decline.

Important Information:

The views and opinions contained herein are those of Schroder Property Investment Management Limited and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

For professional investors and advisors only. This document is not suitable for retail clients.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Property Investment Management Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to
time) or any other regulatory system. Schroders has expressed its own views and opinions in this document and these may change. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Any forecasts in this document should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested.

Issued by Schroder Property Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registration No. 1188240 England.Authorised and regulated by the Financial Conduct Authority.For your security, communications may be taped or monitored.