Exodus from high streets as retailers shut up shop

Retailers could walk away from half of their shop leases in the next three years, dealing another devastating blow to struggling British high streets.

After a late dash to the shops on Christmas Eve by shoppers keen to take advantage of early sales promotions, town centres and shopping centres must prepare for a further wave of desertions, according to new figures by property experts Jones Lang LaSalle.

A glut of retailers signed up for 20-year leases on shops in the 1980s and 10-year leases in the 1990s, creating a flood of renewals on the horizon.

Across a sample of 10,000 shops, Jones Lang LaSalle found that 25 per cent of the current leases were due to expire by 2013 and 50 per cent would expire by 2015.

The number does not include break clauses where retailers also have the right to walk away, meaning that they can simply close these shops or hold out for better terms and cheaper rent from landlords.

Guy Grainger, head of UK retail at Jones Lang LaSalle, said: "This means retailers will be in a much stronger negotiating position with landlords. Rents will head down and retailers will have the option to leave altogether or negotiate for a cheaper rent."

The survey comes as struggling chains have made plans to shrink their high street presence. Electrical retailer Dixons, travel agent Thomas Cook, HMV entertainment stores and the chocolatier Thorntons are all closing branches. Even Sir Philip Green, the Top Shop-to-Miss Selfridge billionaire, has said he could close up to 260 outlets.

James Brown, head of retail research at Jones Lang LaSalle, said: "These figures include prime and non-prime locations and are on top of the existing 14 per cent average vacancy rate in town centres. By 2015, the retail market will be in more of a realistic recovery phase so, in some instances, there will be rental growth still. But certainly some of these leases will be renewed at lower rents and some will be vacated."

The rise of internet shopping and "click and collect" services mean that retailers which used to want 400 shops in the UK now need far fewer.

Gavin George, European managing director at retail restructuring firm Great American, said: "A retailer with only 50 shops and a good online business can reach 75 per cent of the UK population within a 20-minute drive."

Retailers will this week count the cost of Christmas trading season, with many beginning – or continuing – their new year sales today.

Deloitte forecasts that this has been the weakest December for the high street in several years. It predicts that food and non-food retail sales in December by value – excluding fuel but including VAT – will be flat to slightly lower than last year. This compares with a 1.9 per cent increase year-on-year in December last year.

December 2009 saw a 3 per cent increase, although this followed a weak December 2008, when sales by value rose only 0.3 per cent year on year.

Many of the country's most successful retail businesses are looking to expand overseas as their main growth route, including Marks & Spencer and Paul Smith.

Andrew Ware, a partner in corporate finance at BDO, said: "Expanding UK retailers don't want stores in Hull. They are opening stores in South Korea and Azerbaijan. With an online presence they need fewer UK shops."

Rent was due last week and another batch of retailers are predicted not to survive the week, leaving further empty shops across the UK.

Mr Brown concluded: "We have not yet seen the true effect of this shift in demand on our retail landscape, but the next 24 months are likely to see a swift and dramatic change."