Retail and the High Street – Today and Tomorrow
On Thursday 22 November 2018, BPF Futures and Young Professionals in Real Estate Finance collaborated to facilitate intriguing panel discussions on retail and the high street.
Hosted by Aviva Investors at 1 Undershaft, the educational morning kicked off with a spirited update on the global economy by keynote speaker James Knightley (Chief International Economist, ING).
The first panel discussion of the day focused on the pressures that are currently disrupting retail and was comprised of Mark Gibbard (Principal, DRC Capital), Nick McNair (Managing Director, Deutsche Bank AG London Branch), Ruth Moorhouse (Asset Manager, Ellandi) and Graham Spoor (Valuation Partner, Knight Frank).
The second panel discussion then attempted to provide a positive outlook on how the high street may adapt to survive and flourish in a different environment where more and more retail is online and where people value experience and community. Tasked with this challenge were Isabelle Hease (Head of Research and Analytics, Ellandi), Alex McCulloch (Director, CACI Ltd), Katerina Mercury (Senior Retail Asset Manager, Central London, The Crown Estate) and Mark Williams, Director (the Hark Group).
Key points discussed during the panel discussions:
Retail and the High Street Today
- Retail as a place to purchase goods is passé – the bad press on retail generally centres around tired high streets and shops which have not progressed from the simple notion of offering goods for sale. Once proud retailers are now offering a tired service. Modern consumers are more dynamic and value experiences more than having places to conduct retail transactions. Westfield and Selfridges were identified as retailers that have managed to stay ahead of the curve by offering consumers leisure experiences such as food and drink outlets, cinema facilities and bowling alleys.
- Retail and High Street need to stop being used interchangeably – when the word “High Street” is used people automatically assume that the conversation revolves around retail. This needs to change as on average there is 20 – 40% too much retail floorspace on our high streets. The retail offering on the high street needs to be reduced, with additional uses such as doctors, dentists and residential created to drive footfall.
- The regions are proving problematic – despite some press reports, filling high streets with residential accommodation is not the magic answer to the current conundrum. In the north of England, house prices remain cheap in comparison to the south east. For this reason (coupled with the squeeze on spending power), people in the north may choose to continue to live on the outskirts of town as opposed to moving into a busier and more expensive high street environment.
- Individual ownership makes regeneration difficult – high streets which are comprised of individual units owned by separate landlords have not embraced the idea of collective thinking. There needs to be more evidence of local authorities and individual landlords working together to create a uniform vision for the high street.
Retail and the High Street Tomorrow
- Retailers will need to use the online world to their advantage – rather than seeing the online world as a threat, retailers should look to use the world which has hooked millennials to their advantage. Game was hailed as a comeback kid by the panellists. Once a store which solely sold products which could be purchased online, Game has used the online world to turn around its business. Acknowledging the success of online gaming, Game now hosts gaming parties where gamers can visit stores to compete with gamers across the world.
- Wellbeing will continue to rise – the High Street will need to take advantage of the increase in popularity of wellbeing destinations. Gyms, healthy food outlets and even saunas will all be attractive to individuals seeking both social interaction and a release from the stresses of modern life.
- Flexibility will become key – to counter the fact that online retailers have reduced liabilities (e.g. no business rates or service charge) landlords will need to offer tenants flexibility. The days of 10 year leases with a break on the fifth anniversary of the terms will come to an end, with flexible short term arrangements and turnover rentals becoming more prevalent.
- Retailers with large portfolios will need to be more nimble – retailers will no longer be able to treat each store within a large portfolio the same. Retailers will need to offer different products and price points depending on the market in which the store is situated. Marketing will also need to be targeted at local consumers. The clever example of Greggs reversing the logo on one of its Newcastle stores so that it read the correct way when reflected onto the famous Fenwicks Christmas window was noted as an example of a retailer thinking outside of the box and creating a buzz within a particular community.
Paul is a senior associate in our Commercial Real Estate team.