Rent rises for retailers despite malaise

High-street rents are continuing to rise, piling yet more woe on retailers already hard hit by a slump in consumer spending.

High-street rents are continuing to rise, piling yet more woe on retailers already hard hit by a slump in consumer spending.

High street rental growth is currently running at 2.3 per cent a year, with total returns for property investors for the past three years now standing at 16 per cent, according to research by Donaldsons, a property firm. That level of return has not been seen since 1988, when it touched 26 per cent, Donaldsons said.

The survey coincides with research by Ernst & Young confirming what many retailers have long been complaining off, weak consumer spending. Tim Sleep, the head of retail at the accountant, said: "Our study shows that discretionary household spend has stagnated over the past two years and that the trend will continue into 2006.

"We estimate that like-for-like retail sales will decline between 2 per cent and 3 per cent. Retailers should prepare for more woes. The tide has turned and many consumers could soon find themselves in deep water."

A raft of retailers - including Boots, B&Q owner Kingfisher and the normally dependable Next - have all reported tough times on the high street as the retail boom of recent years starts to collapse.

However, Mario Bortolozzo, a partner at Donaldsons, remained confident that, despite the tough conditions and high costs facing retailers, the sector would still grow. "The guys that can afford the rents are usually the ones that do well and the people who cannot afford to keep up are the guys who don't have that good a proposition."

The Donaldsons research also showed certain areas were becoming more popular and therefore seeing higher rent rises. These included the London boroughs of Wandsworth and Lambeth, Liverpool, Leeds, Bath, Lincoln and York.