Changing marketplace

Greg Shutt, associate and agency expert at the Birmingham office of national property consultants Bruton Knowles comments: "For the first time in 20 years, retailer investment in property in town centres has exceeded that in out-of-town locations, due to restrictive government planning policies which have virtually stopped new out-of-town developments."

Consequently the high street independent faces much tougher competition from larger multiples. They come armed with the buying power, legal teams and property specialists. It is also getting more expensive to locate on the high street due to upward-only rent reviews. On average a small retailer's rent now represents between 7-10% of sales (compared to multiples, averaging around 3%).

Out-of-town and edge-of-town locations are often less supportive of independent retailers. Typical unit sizes on modern out-of-town developments tend to preclude most small retailers; developers prefer high profile brand names which are seen as secure tenants. Older out-of-town locations or 'mall' style opportunities can offer suitable units but they can be expensive, because they often boast a supposedly captive audience and provide amenities like parking and direct public transport.

However, Bruton Knowles believe that these pressures may soon undergo a sea-change. A report just prepared (5/12/06) by economist Kate Barker has advised the Government to drop some restrictive policies on out-of-town retail developments. If this is delivered, some balance could return to the market with more multiples pursuing more out-of-town locations.

Factors to consider

Deciding whether to move must be based on realistic analysis of costs and benefits of a location. It will depend on whether this is a new retail enterprise, a downsizing exercise or an expansion. For example for a new enterprise without a loyal customer base, a high profile location may be an important investment in attracting footfall. Whereas, a business relocating to cut costs must be very realistic about the costs of the move – always greater than anticipated – and the viability of trade in a new location, versus the benefit of lower rent.

In addition to footfall and customer appeal there are some key factors to consider: amenities (parking, traffic restrictions, deliveries, public transport, street lighting); competitor impact (the nature of neighbouring businesses); crime and vandalism (security of premises, local policing initiatives, experience of neighbouring retailers); tenure of the premises (freehold or leasehold, if leasehold what length of lease is available): other costs (rates, utilities, associated costs like parking permits).

To help you, consider appointing a qualified surveyor to fight your corner. You'll get an expert who knows local issues, rents and planning policy. It would cost about £5,000 on a £25,000 pa lease. That could be a good investment.

Planning the move

Relocating retail premises is very commercially sensitive: every day you are closed trade is lost, so meticulous planning is essential. The negotiation of the lease and final completion of the legal paperwork will define your timetable but you can have suppliers on standby before confirming final details. Equally, source specialist services like shop-fitting well in advance. Don't forget any obligations you have on your current premises such as dilapidations (the repair of premises, when you quit).

Publicise the move. Plan for changes of contact information on the web, in key directories and in local media.

As well as planning the move, budget tightly for it, including any additional costs at your new premises, allowing for some decline in trading for the first quarter. Even the most successful independents face some fall-off while old and new customers adjust.

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