Retailers' warnings fail to curb rent rises

PRIME retail rents are continuing to grow rapidly in spite of warnings from retailers rental levels are becoming uneconomic.

A report published today by Donaldsons, the chartered surveyors, shows that top shopping areas like London's West End are seeing continued price rises fuelled by increased competition for the limited store space available.

This is despite a fragile retail market which is being affected by a higher interest rates which is dampening consumer demand.

"By the end of the year this might look like the peak but it is too soon to say that just yet," said Edmund Cameron Cuss of Donaldsons. "What we are seeing at the moment is a polarisation in the market with the gap widening between the best locations and the best towns and the rest. A slowdown might come soon but it is not likely to be before the Autumn and we predict a soft landing."

The report shows that nationally the short term trends in rental shop growth have yet to show clear signs of weakness and that the technical recession in manufacturing, blamed on the pound's strength, is currently having little effect on retail growth in the industrial heartlands.

The survey shows that the west end of London has shown the highest growth for retail properties in the UK over the last three years with Manchester, Edinburgh and Bolton the best performing regional centres.

The report also highlights 10 resurgent areas which are now performing well after below average performances in 1994. Some of these such as Falkirk, Southport and Stockport have benefited from regional revivals. Others such as Guildford have managed to buck their regional trends.

However, in spite of the current rosy picture, Donaldsons is expecting the performance of rents to deteriorate from their current level of 6.2 per cent per year increase over the next three years.