High street, joy and (much) pain

high street
22 Jul 2019

High streets, which are the main streets with high pedestrian traffic, are one of the compartments of retail which are facing a profound transformation. The pace is differentiated among various western cities, and the increase of rents is one of the main variable affecting the crisis. The intensity of the latter has required in one case the intervention of the government.

New York

According to the real estate giant CBRE, on the Fifth Avenue in New York, one of the main high streets in the world and within the distance between the 49th and the 59th street, about one shop out of six is available for renting. Taking into consideration a higher perimeter, in the last 18 months brands like Ralph Lauren Tommy Hilfiger, Gap, Calvin Klein, Saks Fifth Avenue and others have closed some of their most prestigious stores. In the case of Henry Bendel and Lords&Tailor, the closure affecrs hundreds of years old shops (1913 and 1914 respectively).

Italy

In the case of Milan, the turnover along the high streets within the last quarter of 2018 has been of 77 retail exiting and 69 entering. The closure of American Appeal and H&M has left its mark, but the initiative of Zara and the entrance of new brands such as Starbucks, Primark and Uniqlo demonstrates that the attractiveness of the area is still very high.

In Venice the businesses which are facing this risk are 8. Among these, there is one worldwide institution such Caffé Florian. The cause of the problem lies in the new regulation of Demanio about the granting renewal of the renting space, which according to the owners, is not sustainable.

In Rome, Burberry will leave the 700 square meters boutique in Via Condotti, the Capitoline high street by definition. We are talking about rentals which go from 10000 euros per square meter. Only Via Montenapoleone, in Milan, is more expensive.

Average nominal prices commercial real estate

United Kingdom, red alert

Here, the contrast between physical retail and e-commerce is particularly dramatic. Between 2007 and 2018 online shopping is increased by 6 times, and currently is almost 20% of the total, while the traditional distribution is stuck (National Statistics Office)

The high streets that rely on the traditional retail without any space for offices and homes, strive for living. This is according the British Property Foundation.

In July last year, the Secretary of State for communities and local entities has formulated two main recommendation to the Chancellor and the Secretary of State. The first one is the institution of a HIGH STREETS TASKFORCE, the second the establishment of a new fund to sustain the renewal and the restructuring of the main streets and urban centers.

As a consequence, a new Fund for the future of the high streets for 675 million pounds has been instituted to help local administrations to adopt the necessary changes.

The resources will be headed to physical infrastructure – including the improvement of the access to public transportation and of other type, of the flux and the movement in the city center, the reduction of the congestion - and the regeneration of high streets in the cultural patrimony.

Competitiveness

COf course, it is not conceivable that for all the high streets in the world such relaunching measures can be implemented. The cities with the highest artistic value have, of course, an advantage. Art and culture, in fact, provide an impressive support from an experiential point of view.

Italy, in this sense, can boast an important competitive advantage. But, even in its most important centers, the perspective of development will be conditioned by the real estate market. And the relation of the retailers with the local administrations and the touristic sector will be crucial.

 

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