Store openings and closures 2022

The best performance since 2017

Against a gloomy economic background, our 2022 store openings and closures results are remarkably positive. The slowdown of closures we saw in our first-half results has continued in earnest, and there are plenty of reasons for optimism.

Our full-year results show a total of 11,530 chain outlets (those with five or more outlets) exited GB high streets, shopping centres and retail parks - the fewest we’ve seen in eight years. Equivalent to 32 closures per day, it’s worth remembering that during the pandemic we were seeing nearly 50 closures per day.

And even chain outlet openings are beginning to look more positive. Though they remain below pre-pandemic levels, they are improving: with 7,903 store openings (equivalent to 22 per day) this year, they are at the highest since 2019.

As a result, overall net closures are at the lowest number we’ve seen in over seven years (equivalent to just 10 net closures per day), and less than half the level seen in 2020 and 2021 (33 and 29 per day respectively).

It’s a positive story across every region. In the first six months of 2022, we saw the spread between regions narrow. That trend has continued to the extent that regional variations have nearly gone. This year has seen the narrowest spread of results in over seven years (GB average -1.7%), with less than one percentage point between the worst performing (West Midlands at -2.3%) and the best (South East -1.3%). This is a particular turnaround for London, which was particularly hard hit by the pandemic lockdowns. It was -5.8% in both 2020 and 2021, significantly worse than any other region, but just -2.2% in 2022.

A retail park-led recovery?

Mirroring the results we saw in our H1 survey, and continuing a trend from 2021, retail parks remain the most resilient location type. Since the pandemic, they have prospered, benefitting from providing easier car access and parking, and an ability to remain open in lockdowns, due to their tenant mix or having essential retailers.

We’re seeing a marginally quicker recovery in retail parks and shopping centres compared with high streets, largely driven by a faster footfall return. While high street recovery looks to be lagging slightly behind, the results are slightly skewed by certain categories.

The continued performance of retail parks and shopping centres as well as their rapid recovery post-pandemic demonstrates the benefits of a single landlord or planning function. It’s a structure which allows a coordinated recovery plan and response, leading to a greater speed of recovery, agility and an ability to realise big ideas more quickly. While high streets are also recovering well, the presence of a fragmented landlord base and others with vested interests naturally leads to a more protracted response and slower results.

Leisure drives openings, banks leading high street closures

Despite growth across a number of our categories this year, only 8 out of 100 multiple types have seen double-digit net growth. Of these, four are leisure.

Takeaways have been ripe for growth for some time, consistently towards the top of the fastest-growing multiple outlets. Much of this success has been driven by the demand for home delivery - which improves the profitability of individual units - and the prioritisation of out-of-leisure by young people, who in turn remain the most positive demographic in our sentiment survey. 

Many are franchise operators, as are the other success story: convenience stores. Nimble, with significant local knowledge and capital-light, these local entrepreneurs can move quickly and service gaps in the market backed by strong brands and helped by lower rents as other operators have retreated post-pandemic. 

Elsewhere, we’ve also seen some categories, such as DIY and pet, experience a pandemic bounceback after falling away previously. And as we’ve seen in the last few surveys, independents have continued to grow, albeit at a slower rate.

A structural shift online is responsible for the majority of closures in many of the categories, such as banking, charity shops, fashion retailers and employment agencies. In our H1 results, we noted banks have been in the six fastest closing categories since 2016, driven by the long-term withdrawal of branches as they embrace a more digital presence. 

Similarly, charity shops are facing the threat of the shift to online shopping, as well as marketplaces for pre-loved items. Like other operators, they’re not immune to cost pressures, but may arguably have less room for manoeuvre on margins. For example, the pressures of rents, rates and other bills rising over the past year has put a greater spotlight on the return that physical shops deliver. While they support a charity's brand awareness within the community, there’s an increasing focus on the financial return they bring. Elsewhere, some have also been impacted operationally by staffing shortages, due to a historic reliance on older volunteers who have now retired or are unable to assist any longer following the pandemic and those who might otherwise volunteer taking on additional paid work in the current economic environment. 

Elsewhere, some categories have been impacted by structural decline, legislation or technological change - e.g. betting shops, mobile phones retailers and car showrooms - whereas others feel the effect of economics or operational viability of smaller outlets.

A tale of three categories: banks vs fashion vs restaurants

The last few years have seen fluctuating fortunes for many categories, none more so than banks, fashion and restaurants.

Comparing the three reveals some fascinating trends.

Restaurants have seen a tumultuous few years. In 2016, they were the fastest-growing category, seeing significant growth through an acceleration of openings. By 2020, they were the fastest declining category, affected by the dual effect of overexpansion and the impact of the pandemic. Now, they are experiencing a revival and a fast recovery, as new chains unencumbered by high rents have expanded quickly into empty spaces, taking advantage of sustained pent-up demand post-lockdown.

Banks on the other hand have generally seen a consistent decline, particularly over the last two years. In total, almost half of the banking outlets have closed since 2015.

Fashion is different again. Chain store closures have mirrored store-based sales as more shopping moves online.
 

The shift to online had a huge impact on retailers during the pandemic as online penetration rocketed. Since we’ve returned to post-pandemic ‘normality’ and footfall has recovered, online penetration has receded significantly from its peak (although it remains slightly higher than pre-pandemic) and openings have increased. 

Since 2015, online penetration of fashion retail has doubled from c.12% to c.23%, peaking at 64% in February 2021 during the third UK-wide lockdown. As a result, store-based retail sales have declined by 0.7% p.a. over that time or 5% in total. Outlet numbers have also followed a similar - if more dramatic - trend to store sales, declining by 37% over that time, as retailers moved to fewer, larger stores. 

As that online penetration has fallen back since the pandemic, far fewer stores have closed in 2022. Going forwards, retailers must be vigilant to any stabilisation in online penetration, and the effect of any elongated cost-of-living crisis, to avoid fashion closures increasing in 2023. While there have already been some business failures at the start of 2023, store openings have been announced by both existing and new operators expanding their UK footprint.

Good news? Bad news? Or a bit of both?

The fewest closures in eight years. Openings returning. Strong performance for leisure and retail. Footfall returning. Overall, there is a lot of cause for optimism in these results.

It’s safe to say that the pandemic retail, leisure and city centre shake-out is over, with all UK regions recovering consistently. The exit of many legacy operators has left some sectors in a much stronger position, and the reduction in online penetration has seen a return of footfall to physical locations. Even with the slight lag relative to other locations, this is good news for the high street, as consumers continue to change the way they both shop for and access information about products.

Rent levels have also normalised, and with changes to the business rates due to come in April, this should also encourage new openings across most locations, adding to the impressive bounceback of retail parks, shopping centres and the growth of independents.

But as we highlighted in H1, positivity must also be viewed alongside the cost of living, people’s spending intentions and continued economic volatility.

It’s also worth highlighting that despite the positivity, opening rates remain below pre-pandemic levels, with only eight categories growing materially. Added to that is the fact that any post-pandemic online-to-instore correction is likely finished, leaving little room for retail closures to keep slowing in 2023.

Elsewhere, the rapid closure of services continues. In banking in particular, it shows no signs of abating - one in eight are closing every year, and there has been a negligible improvement this year compared with 2021.

With hybrid working now fully ingrained in society combined with a shift to larger retail park stores, the high street has work to do to address a footfall that is unlikely to recover much more. Added to increased operating costs and the withdrawal of government support likely hitting independents harder in 2023, what can high-streets do to prevent a continued decline? Are there lessons they can take from retail parks and shopping centres to accelerate recovery? Our Retail Outlook 2023 looks at the trends we expect to see this year, from overcoming inflation to meeting changing expectations, as well as how businesses can prepare, predict and respond to changes.

Ultimately, our 2022 numbers show that all retail locations across GB are performing well. And they now have significant foundations from which to build success. Many sectors are now in a strong position to capitalise on opportunities, as long as they do so while remaining vigilant to any potential storm clouds.