The number of large department stores in England has fallen by 25 per cent in less than a decade to just 180, according to new research.
According to peer-to-peer secured lending platforms Lendy, the number of large department stores – defined as multi-level stores that have distinct “departments” and often in-store franchised retailers – in 2009 stood at 240.
Lendy said department stores have been affected by the rise of online shopping, as heavy debt burdens hamper their own investment in ecommerce and in-store refurbishment.
In addition, department store businesses have built up that debt burden through the high numbers of mergers and acquisitions the sector has been subject to in the last 15 years.
For example, the purchase of Debenhams by PE investors in 2003 gave it a debt pile of £1 billion that it has been paying down since then.
Debenhams is now mulling plans to downsize at least 30 of its stores, while House of Fraser recently announced plans to launch a company voluntary arrangement (CVA) in June, after they requested a rent cut in January.
Other department stores that have struggled in the current economic climate include BHS, which collapsed in April 2016, and Marks and Spencer, which recently announced plans to close 100 stores by 2020.
Lendy said that with money being spent on servicing their debt repayments rather than investing in ecommerce, they have been unable to meet the challenge of online competitors such as Asos, Farfetch or Amazon.
“The falling number of department stores shows they have borne much of the brunt of the shift towards internet shopping,” Lendy co-founder Liam Brooke said.
“Local authorities will have to consider whether they want to make it easier to change the use of department stores to being partly residential as it will be hard to fill these properties with new tenants.”
“However, retail property can still be a successful investment as part of a diversified portfolio. As with all property, retail property investors must carefully consider all risks when deciding to invest in certain projects or not.”