Revealed: The Towns Worst Hit By The Death Of The Department Store

The British department store is reeling, and some U.K. towns are very exposed to the sector.

The decline of what was once the stalwart of British retail was in focus again this week, as Debenhams issued its third profit warning this year, blaming weak consumer spending and rivals’ discounting.

Intelligence from commercial real estate data specialists Datscha compiled for Bisnow has revealed the U.K. towns worst hit by the travails affecting the department store sector.

Debenhams is shutting two and reviewing the future of eight of its stores. The profit warning came in the same month that House of Fraser said it was shutting 31 stores. It is not a department store per se, but Marks & Spencer has also said it will shut 100 of its about 1,000 stores, with the locations yet to be decided. And markets are still reeling from BHS' 2016 liquidation, which has led to the closure of 163 stores.

Scraping lend registry data, Datscha identified nine towns which had a BHS department store and have a House of Fraser that is closing, a Debenhams and a Marks & Spencer. 

Some of those are large cities with solid consumer spending and large numbers of tourists, like London, Birmingham and Edinburgh.

But the others are regional cities with less robust fundamentals: Cardiff, Grimsby, Middlesborough, Milton Keynes and Swindon.

Darlington does not have a Debenhams, but it has a House of Fraser and an M&S which are both closing. 

Aylesbury, High Wycombe, Plymouth, Telford and Wolverhampton are all towns where House of Fraser is closing and BHS stores remain vacant two years after the retailer closed. 

“Many of these units will remain vacant as there is no tenant demand for stores of this size, in the majority of these locations,” Datscha Head of Research Lesley Males said. “New retail entrants will look at only prime destinations like Oxford Street, the Trafford Centre or the Bullring, etc. Many of the locations earmarked for closure are not prime retail destinations. Taking Darlington as an example, they have already lost BHS, and both the Marks & Spencer and House of Fraser will close down, as well as TK Maxx, Starbucks and McDonald's in recent years. 

“Places like Darlington lose trade to larger nearby retail destinations such as Newcastle and Gateshead. Flagship stores like Oxford Street will prove less of a problem to re-let as they are on a prime pitch on one of the world's most famous retail destinations.”

It is not all doom and gloom in regional towns with vacant department stores that need to be filled. Males points to the example of the former House of Fraser store in Hammerson’s Highcross scheme in Leicester as an example of how vacant department stores can be reconfigured.

The store was taken over by Zara on the lower levels, the upper level became an additional car park and the former service yard will be transformed into a food and beverage location as well as a leisure unit by the end of 2018. But executing this kind of strategy takes a lot of skill.

“For the stores located in shopping centres under management from the likes of British Land and the Crown Estate it may be less of a problem as these types of companies are experts at creating retail destinations,” Males said. “How will institutions such as the big funds who are managing stand-alone department stores adapt?”

Males also points out that some of the alternative uses posited for department stores in Central London, where WeWork is reported to be in talks to lease space from Debenhams on Oxford Street, would not be as viable in regional cities.

The implications are clear for new retail developments as well as existing schemes. The old model of anchoring a new scheme with one or two department stores is no longer viable, and developers will now have to innovate. 

“The whole idea of department stores anchoring retail developments is now questionable,” Harper Dennis Hobbs Director Jonathan De Mello said. “Retail will not be sustainable without more leisure, more food and beverage offers, perhaps more residential — and the idea that you can have half the floor space occupied by a department store is just not going to work any more.” 

De Mello suggested the answer is a mix of larger floorspace users — but also a rethink of what new retail space is meant to achieve. “You could create a cluster of major space users — a Next, a Primark, a TK Maxx, Zara, H&M, all of them paying a reasonable rent, unlike the old 150K SF department stores, and it could mean better income for landlords and a better shopping experience for shoppers, because people don’t necessarily want that all-in-one-place department store experience,” he said. “Developers need to rethink who their occupiers are, and where their income comes from and to think about this long term.”