EDINBURGH continues to have the lowest retail vacancy rate of the UK’s major cities, excluding London, despite the introduction of St James Quarter, according to new research from Knight Frank.
The commercial property consultancy’s analysis found that despite the new shopping district contributing to the expansion of the city centre’s total retail space by 424,000 sq. ft. year-on-year, the number of vacant units remained at 13%.
The average vacancy rate among the UK’s top 10 major conurbations in the nations and regions was 21% by the end of last year. Manchester had the second lowest vacancy rate at 16%, while Glasgow stands at 22%.
While Edinburgh’s sales productivity – a measure of non-food spend by consumers compared to an area’s retail space – inevitably dropped with the completion of St James Quarter and the post-Covid fluctuations in spending, Knight Frank added that it has remained ‘relatively resilient’ at £389 per sq. ft. against the UK cities average of £357 per sq. ft.
Euan Kelly, capital markets partner at Knight Frank Edinburgh, said, “Edinburgh has always been a mixed-use city centre, supported by strong footfall. But the introduction of St James Quarter has meant different areas have re-established themselves or begun to carve out their own distinct identities. These different pitches are showing they can exist together, rather than compete.
“George Street, for example, is still performing very strongly and remains the focal point for aspirational and luxury brands in the city. At the start of 2022, the street had a number of ‘To Let’ boards but the vast majority were snapped up in relatively quick order by occupiers, and the result is that rents have been moving up from a low post-covid base.
“Retail more generally has gone through a challenging period, marked by structural changes. But, through that process it is beginning to emerge in better shape, with operators trading well, rents re-basing to a lower, more sustainable level, and business rates reducing as well.
“In turn, we’re seeing more investor interest in the right type of retail property. Last year we had a significant number of enquiries for three assets on George Street, particularly from private wealth given the attractive lot size, tenant profile and obviously location. This trend is set to continue in 2023 and we have a number of clients looking to invest.”
Stephen Springham, Knight Frank’s head of retail research, added, “Ostensibly, Edinburgh is going against the grain of other UK cities in that it has seen new large-scale retail development. No other city or town in the country has anything like this in the development pipeline and most are grappling with a legacy of over-supply.
“But St James Quarter addresses and reverses one of the key structural failings of retail markets generally – a lack of investment. So many shopping centres and towns have historically been starved of capex and investment, so it is hardly surprising that they have failed to move with the times and are struggling. It is not a case of too much or too little floorspace, much more of not having enough of the ‘right’ floorspace – the ‘right’ floorspace being modern, well-configured and corresponding to the evolving needs of the audience it serves.
“In the short-term, there will inevitably be a period of disruption as the new scheme beds in, retailers and consumers alike assess the impact, and the city adapts to slight shifts in gravity. But in the longer term, the holistic benefits to the city will become increasingly apparent.”