But the good news is that Historic England believes that the town could soon come off its 'at risk' list, possibly as early as next year, as a result of the good progress that is being made and the council's investment plans.
SKDC says it welcomes the report and Historic England's acknowledgement that the situation was already 'improving' thanks to its work with its partners to protect and enhance the area.
Historic England's annual assessment, which is part of a national audit, comes soon after an announcement by the Leader of SKDC, Councillor Matthew Lee, of a major programme of investment across the district at a business 'summit' in October.
Commenting on the report, Councillor Lee, said: "We welcome Historic England putting their usual informed spotlight on Grantham's conservation area following our officers' report on the town.
"We agree that the area needs attention and investment to tackle the challenges we face, from the volume of traffic to ensuring our shops are fully occupied. However, we are encouraged by their confirmation that the situation is improving.
"We are already taking action and are committed to protecting and enhancing our heritage here in Grantham and across the district. Heritage is the key to maintaining the vibrancy of our market towns and giving a significant boost to the local economy.
"In the past few years we have been working with Historic England to improve shop fronts in key locations within the conservation area, returning them to their former glory. We have also taken enforcement action against inappropriate development.
"We have also identified a number of new initiatives as part of our investment programme, including developing a 'heritage quarter', from St Wulfram's church to the railway arches at the end of Westgate
"We look forward to working even more closely with Historic England so that, in the future, Grantham is commended for its conservation area and nowhere to be seen on its 'at risk' register."
"We are very fortunate to have two conservation officers within our planning team, illustrating our commitment to our conservation areas across the district. "
Clive Fletcher, principal adviser for Historic England in the East Midlands, said that the Grantham conservation area could soon come out of the at risk category, saying:
"A re-appraisal will have to be made next year, but there has been good progress. Much of this evaluation is about shop vacancy and loss of original detail from historic buildings. We are working with SKDC to improve an important part of Grantham."