While most operators and landlords have experienced a turbulent few months over lockdown, increased footfall levels in UK retail destinations suggest that consumers are embracing the return to the ‘new normal’.

As we start to look to the future, the government announced support for hospitality in the summer Budget and proposed reforms of the planning process in England also being announced, this should serve to aid recovery in the sector.

HEADLINE UK RETAIL INSIGHTS

Footfall trends

• Footfall figures have continued to improve in recent weeks, in line with the gradual reopening of various subsectors. The reopening of all non-essential retail provided the most pronounced uptick in weekly footfall since the start of the lockdown period, with Springboard reporting a 40.3% week-on-week increase across all UK retail destinations on average in the week to 20 June.

• High streets and shopping centres experienced a more marked improvement to weekly footfall following the widespread reopening of non-essential retailers, reporting a week-on-week increase of 46.6% and 42.3% respectively. Meanwhile, retail parks had already been benefitting from essential retail as well as the earlier reopening of some homeware retailers, therefore recording a more gradual weekly increase of 24.6% in the week to 20 June.

• Footfall growth over the last fortnight has been more subtle, with the week ending 4 July experiencing a 4.1% increase across the UK on average, compared to the week prior. However, with the seven-day reporting period ending Saturday 4 July, this largely downplays the impact of both hospitality and hairdressers reopening.

• The lifting of lockdown restrictions on pubs, cafes, restaurants and hairdressers helped to boost weekend footfall in England, with 4–5 July averaging week-on-week growth of 13%, driven primarily by the substantial 24% rise in footfall across high streets.

UK Chancellor, Rishi Sunak, delivered his Summer Economic Statement on 8 July

• The government announced a £30 billion plan to “protect, support and create” jobs.

• In respect of the hospitality sector, the Chancellor confirmed VAT will be cut from 20% to 5% for the next six months, to include food, accommodation and attractions. This is in place as of immediate effect, ending on 12 January 2021.

• Mr Sunak further announced an 'Eat Out to Help Out' scheme to encourage consumer spending at restaurants, pubs and cafes. This scheme provide a discount of up to 50% (with a maximum discount of £10) and applies Monday–Wednesday. Businesses are able to register for this scheme from Monday 13 July.

• No announcement has yet been made in regards to the retail sector.

Government lifting of restrictions in England – a summary of current rules and guidelines;

• The latest government announcement on Thursday 9 July permitted the reopening of outdoor pools from 11 July, followed by the reopening of indoor gyms, swimming pools and sports facilities from 25 July. From 13 June, beauticians, tattooists, spas, tanning salons and other close contact services will also reopen.

• The previous announcement on Tuesday 23 June was focussed around the revision of the social distancing rule in England. The two metres recommended distance has now been revised to one-metre-plus to include pubs, restaurants, hotels, B&Bs, hair dressers and nail salons from 4 July. All restaurants and pubs are limited to table service and customers must provide contact details when they enter.

• In addition, it was announced that cinemas, museums and galleries were able to reopen from 4 July, along with leisure attractions and outdoor gyms, playgrounds, cinemas, museums, galleries and arcade, libraries, social clubs and community centre.

Announcements regarding the lifting of restrictions in Wales, Scotland and Northern Ireland, and reopenings across the UK

Wales

• The first minister of Wales announced further easements of lockdown measures in his speech on Friday 10 July. As of 3 August, pubs, cafes and restaurants are permitted to reopen in Wales, indoors. Campsites, hairdressers, beauty salons, cinemas and playgrounds are also to reopen in the next three weeks.

• Previous announcements included the opening of non-essential retail from Monday 22 June.

• On 2 July it was also announced that pubs and restaurants can open outdoors from 13 July under new Welsh government plans.

• The following retailers reopened all Welsh stores from Monday 22 June:

• F.Hinds, Clarks, H&M, Ikea, and JD Sports

• Next reopened five branches from Monday 22nd June to include Bangor, Cardiff Queen Street, Cardiff Leckwith, Llandudno and Swansea. Reopened a further three sites from Tuesday 23rd June, including Cwmbran Retail Park, Merthyr Tydfil and Prestatyn

• Debenhams announced the reopening of 8 welsh stores from Tuesday 23 June, to include stores in Cardiff, Newport and Swansea

Scotland

• The Scottish Government announced a further easing of lockdown restrictions on 18 and 24 June, with the initiation of phase two of the four-stage plan.

• With the announcement of phase 2, as of 29 June, outdoor markets are able to reopen, along with all non-essential shops of all sizes if they have outdoor entrance and exit points.

• Outdoor businesses have also been able to reopen from 29 June. Beer gardens and outdoor restaurants were permitted to reopen from 6 July, with pubs and restaurants allowed to use indoor areas from 15 July.

• Indoor shopping centres however remain closed, with the exception for access to essential shops includes supermarkets and pharmacists.

• Further guidance was provided on 2 July, with the first minister commenting that the two-metre social distancing rule would be eased for some premises as Scotland enters the next phase of recovery from 10 July. Face coverings are also become mandatory in shops from this date.

• The wider tourism industry in Scotland will be able to reopen from 15 July, with pubs and restaurants permitted to relax the social distancing rule if plastic screens are in place or better ventilation is installed. In addition to the reopening of shopping centres fully, from 15 July, museums, libraries, galleries, cinemas and hairdressers will also be permitted to reopen.

• Retail openings have included the following:

• Primark opened store on Edinburgh’s Princes Street, Aberdeen’s Union Street and Glasgow’s Argyle Street, with a large queue forming from 5:50am.

• Marks and Spencer clothes and home departments have been reopened in stores across Scotland, including Aberdeen, Edinburgh and Glasgow.

• Debenhams Six branches reopened across Scotland to include Ayr, Dumfries, Dunfermline, Edinburgh, Glasgow, and Perth.

• Other retailers who opened branches across Scotland include:

• H&M, Topshop, New Look, Game, HMV, Clarks, Foot Locker, Lush, Next, Schuh, River Island, The Body Shop, Waterstones, Zara, and Apple

Northern Ireland

• Following the reopening of non-essential retail, restaurants, hotels and bars were permitted to reopen from 3 July.

• The following hotels confirmed reopenings on 3 July in Belfast:

• Titanic Hotel, The Merchant Hotel, Killeavy Castle Estate, Maldron Hotel Belfast City, Fitzwilliam Hotel, Malmaison Hotel, Ibis Belfast City Centre, Ibis Queen’s Quarter and Crowne Plaza Hotel, Ten Square Hotel (from 17 July), Hilton Belfast (from 20 July), Hastings Hotels – Grand Central Hotel and Stormont Hotel, Culloden Estate and Spa (from 17 July), and Hastings Europa Hotel (from 26 August).

• Belfast pub and restaurant reopenings include the following, from 3 July:

• Fish City, Coppi, Deanes at Queens, AMPM, Morning Star, Cutters Wharf, Little Wings, Shed Bistro, Zen, Morning Star, Dirty Onion, Kelly’s Cellars, Café Parisien (from 17 July), Holohan’s Pantry (from 16 July), and Ox (from 5 August).

England

• In light of recent announcements allowing restaurants to reopen, the following occupiers have made statements:

• Pizza Express reopened 46 restaurants on 9 July with digital menus and online payments. Click and collect takeaway services remaining in 23 of the pizzerias

• Dishoom reopened Carnaby Street and Shoreditch restaurants on 10 July, with Kensington following on 24 July. Its Manchester location opened 10 July followed by the Edinburgh site to be reopened on 17 July

• The Fortnum’s Bar and Restaurant at the Royal Exchange will reopen on 13 July

• The Quality Chop House in Clerkenwell will reopen on 14 July

• The Ivy Brasserie restaurants in Soho, Kensington, St Johns Wood and Tower Bridge will reopen on 15 July

• The Ritz will reopen its Palm Court for afternoon tea on 18 July, with its Michelin-starred restaurant to reopen on 27 July

• Hawksmoor will reopen in London gradually over the course of summer. Borough reopened on 9 July, with Seven Dials due to reopen on 21 July, Spitalfields on 24 July, Air Street on 28 July, Knightsbridge on 31 July and Guildhall on 1 September. The restaurant plan to reopen the Manchester site on 16 July and Edinburgh on 6 August

• Café Murano will reopen the St James’ site on 21 July and Bermondsey on 15 July

• The Social Company Jason Atherton’s London restaurants including Pollen Street Social, City Social, Social Eating House and 5 Social will reopen on 1 August

• Blacklock have reopened in Shoreditch on 9 July, and will reopen in Soho on 23 July and in the City on 1 September

• Rick Stein’s restaurants in Cornwall, Poole, Winchester and London reopened on 4 July

• Crafthouse will be one of the first restaurants to be reopened by the D&D group, with the Leeds restaurant reopening on 4 July

• 20 Stories another D&D group restaurant in Manchester reopened on 4 July

• Le Manoir aux Quat’Saisons the Oxfordshire restaurant will reopen on 14 July

Trading update following the reopening of non-essential retail

• Major city centres are under increasing pressure with central London suffering in particular, due to the lack of tourism and office workers in the West End, the City of London and Midtown.

• Transport hubs also continue to be under pressure as a result of limited commuting and tourism footfall.

• Neighbourhood spend continues to remain high, particularly in towns such as St Albans.

• Retail parks and prime shopping centres have witnessed a ‘honeymoon period’ following the reopening of non-essential retail. Sales have been particularly buoyant for the jewellery sector as well as menswear. Sale of ladieswear is down due to the inability to try clothing on before purchasing.

• Westfield London had a successful reopening with closure of the centre due to full capacity.

• Margins are tight across all sectors as the majority reopened in sales.

June Quarter Date

• The year’s third quarter rent become payable on 24th June, and initial reports from ReLeased have suggested that 13.4% of retail rents were collected, compared to 19.8% from March quarter. Their data has also shown an increase in the number of credit notes in June, which is indicative of the rent-free periods agreed as landlords and tenants have spent the last few months negotiating allowances in light of the Covid-19 pandemic and lockdown measures.

• Given that many retailers have now reopened and following on from the reopening of the hospitality industry from 4th July, will we see an increase on this by September? With the furlough scheme coming to an end, as well as the current moratorium on evictions for non-rent payment also due to end, we anticipate we will see more activity following this.

New funding during lockdown:

• While Covid-19 may have halted many aspects of the retail and leisure market, some operator acquisition deals have continued to complete, highlighting longer-term confidence in parts of the sector, particularly from private equity backers.

• Oliver Bonas has secured funding of £3.5m from HSBC through the government-backed emergency business loan scheme. Sales have been significantly hit since lockdown and this funding is said to enable the retailer to refocus and develop the online platform.

New acquisitions during lockdown

• Boohoo acquired the online business and all intellectual property of Oasis and Warehouse in a £5.25m deal from Hilco Capital. The Oasis and Warehouse Group closed all stores late April resulting in 1,803 job losses, after administrators were unable to find a buyer.

• Go Outdoors has been bought back from administrators by JD Sports in a £56.5m pre-pack deal. A fundamental restructuring of the company is expected following heavy losses prior to the coronavirus outbreak. JD Sports boss, Peter Cowgill has commented “we look forward to having positive conversations with landlords and agreeing new flexible lease contracts which reflect the widely reported challenges of reduced consumer footfall”.

• Spanish fashion and fragrance giant, Puig, acquired a majority stake in UK beauty company Charlotte Tilbury, in a deal which is set to value the company at up to £1 billion.

Planning Reform 2020

• On 30 June, the Government announced that it will look to streamline the planning process as part of its objective to ‘kickstart’ the economy post Covid-19. The reforms to legislation within England are stated to be the most radial since the Second World War.

• One of the initiatives includes greater flexibility to enable the ‘repurposing’ of commercial premises. This would include a ‘permitted change’ from retail (A1) to other commercial uses including: cafes and restaurants (A3) and offices (B1a). The effect of the proposed legislation would mean there would no longer be a requirement for a formal planning application to facilitate changes of use. The new legislation will empower the property market with greater agility to respond to changes in demand.

• The provisions are stated as being permanent rather than the temporary provisions which were enacted post the global financial crisis in 2009.

• The Government has yet to provide the full details of the new legislation however the changes are due to be enacted by September this year and further information will be published over the coming weeks. This is likely to include any limitations on the emerging provisions.

• The emerging legislation provides an opportunity for landlords and tenants to proactively manage their portfolios. Savills has set up a dedicated, multi-disciplinary team (development, planning and agency) to provide bespoke advice so our clients can maximise the potential of the new provisions as quickly as possible.

CVA & Administration announcements

• Travelodge CVA was approved on the 19th June following months of negotiation. The terms of the CVA proposed a 38% total reduction in rent, paying 62% of rent due between April 2020 and the end of 2021 with no closures. Shareholders put forward a £240m support package, using £100m of cash reserves, accruing an additional £100m in debt and acquiring £40m in new equity.

• The Restaurant Group (TRG) CVA was launched on 10th June and approved on 29th June with 82% of all creditors voting in favour of the proposal, closing 125 sites and agreeing new lease terms on 85 sites, bringing the portfolio down to 160 sites in total. The principal brand Frankie & Benny’s was primarily affected, following the administration of Chiquitos in March which saw the closure of 61 out of the 80 restaurants held under the company.

• Byron filed a notice of intention to appoint administrators on 29th June, giving the company a maximum of 20 days to find a buyer or alternative finance for the business. Reports at present suggest that there are three potential bidders for the business and they are continuing to try and renegotiate terms with landlords on units across the portfolio.

• Poundstretcher CVA was approved on the 3rd July with 90% of all creditors voting in favour. They proposed a restructure of their 450 store portfolio, reducing rents on 84 stores by 30–40% for three years and 253 stores will continue to pay rents for six weeks after which they would switch to a performance related payment. Terms will remain the same for 94 stores and 23 stores held under a separate company will be placed into admin. They have cited significant impacts on profitability over a sustained period which has been further exacerbated by Covid-19 as the reason for the CVA.

• Casual Dining Group (CDG) appointed administrators on 2nd July ahead of an expected sale of the business. The CDG board advised that they have received a number of offers for the business and that the administrators will look to progress these having taken the decision to immediately close 91 restaurants out of the 250 within the portfolio. CDG are continuing to try and negotiate with Landlords to agree new terms on the remaining properties.

• All Saints CVA approved on 7th July, with 93% of all creditors supporting the proposal to restructure their UK and US portfolios. In the UK they will be moving 41 stores to a turnover rent basis and will close a small number of stores that are no longer profitable. They have claimed that the sudden closure of a majority of their stores has led to ‘a substantial and sudden’ impact on sales, leading them to the CVA process.

• Hotter have said they are preparing to CVA following an unsuccessful attempt from their owner Electra Private Equity to approach Landlords and agree a reduction in the number of stores and costs. The suggestion is that the ambition is to reduce the portfolio from 61 stores to 15 stores.

EUROPEAN RETAIL INSIGHTS (FROM SAVILLS RETAIL AGENCY TEAM)

• The latest insights from our colleagues in Europe show us the results of countries that have begun to open up the retail and leisure sectors with social distancing and safety restrictions in place.

Insights from France

• Restaurants were permitted to reopen in France from June 2 and cinemas from June 22.

• Out of Town Retail is doing really well with High Street Retail continuing to underperform.

• Retailers experiencing 80% sales turnover levels this week (six weeks post lockdown), up from the 40–50% level they experienced (two weeks post lockdown)

• Offices are all at 30% capacity and no tourists so footfall in Paris is very low.

• Investment market is slow but picking up.

  Insights from Ireland

• Sales up initially after shops re-opened but fear that it was a honeymoon period.

• 40% footfall from pre-Covid levels experienced in shopping centres, with mixed reports on turnovers.

• Shopping centres are trading better than high streets at the moment in Ireland.

  Insights from Italy

• Similar update to France with High Street retail impacted as only 30% of office workers are back in the city centres. Offices however will be fully operational from September onwards.

• Luxury retail continues to suffer due to the absence of tourism. Food and Beverage concepts remain closed and will re-open in September when tourists start to return.

• Landlord concessions are happening but by way of rental deferment, they are not reducing rents in most instances.

• Shopping centres re-opened late May and experienced four weeks of strong growth. There has been a real drop in footfall however in late June, being just 23% like-for-like compared to 2019.

• Neighbourhood shopping centres trading significantly better than some of the larger regional malls. Out of Town Retail is also performing well since re-opening.

  Insights from Spain

• Banks and foodstores appear to be the most active occupiers in the market.

• Follie Follie and Inditex have announced closures of a significant number of stores. Inditiex for example are closing 300 stores in Spain, as part of a wider announcement to close a total of 1,200 smaller outlets with investment in IT systems.

• The market is beginning to move again in the Shopping Centres sector. A large number of Spanish retailers are closing stores in shopping centres, many including retailers that are generally very active under normal circumstances.