What now in British retail? The expert insight. By James Andrews, Partner at KLM Retail with 30+ years retail property experience.
Q1: What are the biggest challenges facing established British retailers?
Being desirable. The retail proposition in our provincial town centres has, in so many cases, become so predictable for many years, that the attraction of going shopping has worn off – slowly but surely.
When shoppers can vote with their clicks, shoppers need a reason to go out and shop. The current downwards spiral of quality and innovation in many places is compounding the issue. This isn’t universally true and there are shining examples of thriving retail centres which are hugely inspiring places to spend time. We should take the ingredients from the most successful places and add them to the mix, when we reimagine those locations with the most challenges.
John Lewis’s recent trading statement made a reference to an oversupply of retail property as a significant contributor to price competition. Whilst this is right, the depth and quality of the offer is also relevant.
Q2: What solutions do you think would be most effective?
Accepting a new era of rental levels, lease commitments and investor returns would be a helpful start. The days of the next multiple setting a new level of rent which everyone can pay are gone. Allowing retailers to make money and pay rents relative to their own affordability would increase retail health and with it, asset health. The solution is of course going to require a unified approach from landowners, local authorities and central government to consider wholesale redevelopment of town centres and a re - designation of space fit for the requirements of today’s population, that performs a considered role within the hierarchy of competing centres.
The nature of the built stock also needs a significant rethink. The majority of distress being experienced in assets now, (and with more to come) is their one size approach: by that I mean the scores of mass market dominated shopping centres right across the country. These assets do not provide unit sizes, physical environments and levels of overhead which appeal to a broad mix. Those towns which are largely ‘High Street’ in nature, of a more human scale with streets and buildings of differing characters tend toward a more diverse and interesting mix- and often, greater health. There are lots of independent businesses looking for sustainable locations to thrive.
Given the cycle of centre redevelopments which almost certainly faces us now, I would favour a step away from cathedrals to consumerism and a return to townscapes with a variety of uses, more independents, more open spaces and more residents. Putting employment back into towns and away from our ring roads would improve our urban cores and probably provide those working there with more enjoyable environments.
Q3: How can stakeholders adapt?
For some, it might require brave leadership to accept the need for a solution now, rather than waiting to find the issues have become harder and costlier to deal with in the future. Property alone will not provide the solution and nor should it. The impact on our town centres of a new era in retail fulfilment, will require the participation of many stakeholders, particularly local and central government as the collectors of taxation, providers of core services and planning direction.
Imagination and foresight to deal with the current trajectory is badly needed. Likewise, it is time for investors to plan their asset differently and for valuers to consider how to properly reflect diversity in rental payment and covenant strength. Monies, will initially be lost, but we have to step back to move forward. With greater focus, we will see greater government intervention. Who remembers ‘disadvantaged areas’, stamp duty free zones, enterprise zones, industrial building allowances and tax break incentives? Similar incentives will be required if we are to encourage brick on brick.
There is strong and inspiring innovation culture in the economy, and retail at grass roots level is no exception. Town centres once again need to embrace these uses and create environments where the small and independent minded can survive alongside the household names. There are many paradoxes to the current retail climate – amongst which, that the local butcher, baker and candlestick maker may be a more sustainable business than some of our most established names. However, that may be just down to another issue with retail – service and the deliverance of an experience to which we want to return. Now don’t get me started…