It's no wonder old Woolies stores blight our streets

With online retail, expanding supermarkets and the credit crunch, what price an empty Woolworths?
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The Independent Online

The mid-afternoon sun burns fiercely on the four tables outside the Ludo Lounge, where families and couples are soaking up the rays while enjoying fresh tapas and large glasses of red wine. Residents in Southbourne, a sleepy suburb of Bournemouth, have never before seen anything as trendy as this café-bar in their high street.

Richie, the bespectacled 25-year-old general manager, smiles as he points to the bar's greatest prize: a red Woolworths sign with its distinctive logo of an off-centre white arc over a W. The board hovers over guests who are enjoying chorizo and shredded pork belly on the bar's sundeck. "I'm not sure they [Woolworths] know that we've got it," Richie grins.

Just two months ago, this bar was one of the more than 300 former Woolworths stores that lay vacant a year-and-a-half after the 807-branch retailer went under. For a century, Woolies was one of the most famous brands in the high street, but now it exists only in cyberspace as part of the online empire of Shop Direct, which paid an estimated £10m for the name in February last year.

An empty Woolworths store in Crystal Palace, south London, offers what has become an all-too-common sight across the country. It is 8pm and two homeless men sit on the pavement, leaning their weary backs against the locked front doors, drinking from cans of ultra-strong lager. There is a fair chance those doors will never be unlocked again.

Over the past six months, the Local Data Company (LDC) has been updating its records on what has happened to these old Woolworths stores and has produced a report for The Independent on Sunday that will be distributed more widely tomorrow.

Although the data has a 5 to 10 per cent margin of error, given that some stores might have been taken over since LDC visited them, the results show the extent to which the UK high street continues to suffer in the recession.

Matthew Hopkinson, the business development director at LDC, says: "Given that some experts think that 18 to 20 per cent of empty retail units might never be re-used, apply that to Woolworths and it could be that 150 units will be empty forever."

The expansion of supermarkets into non-food sales and the growth of internet retailers such as Shop Direct mean that these big sites, perhaps 5,000 to 15,000 sq ft each, are simply not in demand.

The likes of Poundland and 99p Stores have already cherry-picked the best sites, with those two value chains taking around 80 stores. In total, discount retailers now have 22 per cent of the sites, as the size of the old Woolworths stores is perfect for their bulk stock discounting model.

Jim McCarthy, the chief executive of private equity-owned Poundland, did reveal last week that he plans to open 60 new stores this financial year. He confirms that Poundland has exchanged contracts on 10 more former Woolworths sites, but hints that there will not be too many more as "the best locations have already gone".

McCarthy also points out that "the sheer number of business failures" means that there are plenty of other good-quality empty shops available. It is estimated that as much as 12 per cent of all high-street stores lie empty, largely the result of people's falling disposable income.

Tim Danaher, the editor at the industry bible Retail Week, says: "The thing with these Woolies is that there is a long tail of stores where no multiple retailer will want to be, like those in suburban shopping parades, locations that have just been passed by [in modern shopping]. The ones that people wanted have been taken now – when Woolworths went bust the big retailers were all over them like a rash."

So although there might be the odd one-off experiment, like the Ludo Lounge, the core retail chains have probably had their fill of Woolies.

Also, the refitting costs on the shops that have been taken over are said to have been much higher than the new occupiers expected.

This is because, in the long-established Woolworths, many of the shops will have had the same tenant for a quarter of a century or more. The private landlords who own the units have inevitably suffered as they struggled to refurbish some of the more dilapidated stores and then failed to re-let them. Often landlords have failed to acknowledge that they are not going to get the same rents for these units that they received before the credit crunch, thus pricing themselves out of what little demand there might be in a faltering retail market.

"The problem for the owners is that some of these units are in a real state of disrepair, and then they find their long-term tenant disappears overnight," says an industry expert. "You might have to spend £250,000 on things like getting rid of asbestos."

Worse still, the Labour government abolished empty-property relief in 2008. This meant that landlords had to pay business rates on properties that were not let, the theory being that it would put off landlords who were happy to allow buildings to rot.

Liz Peace, the chief executive at the British Property Federation, says: "It is a pity that the owners of these vacant shops are paying out thousands in empty rates rather than making good use of that money to improve the stores to make them more attractive letting propositions."

The findings also gives a broad indication of regional consumer spending (see map).

"The survey reflects that certain areas are finding times tougher," says Andy Garbutt, the retail director at PricewaterhouseCoopers, the big-four accountant.

For example, in Scotland 54 per cent of Woolworths sites are gathering dust, the highest percentage in mainland UK. A Scottish Retail consortium-KPMG survey last week painted a gloomy picture of the sector north of the border, with like-for-like sales down 1.6 per cent in July on the same time last year. This was the second-biggest monthly fall in the past decade.

London, which is heavily squeezed for retail space, is the most fully occupied area on the mainland, with eight in 10 Woolies stores filled. This might demonstrate a general upswing in the capital's economy, as barely half the shops were occupied a year ago. Also, more than half the North-east's old Woolworths stores now have tenants against just 10 per centin July 2009.

However, with so many Woolies still lying empty, the main legacy of one of the high street's most visible brands could be the blight of ageing, empty stores pockmarking suburban areas. That, and one regularly cleaned sign above a trendy café-bar on the south coast.