Retail Destination spoke to people from across the retail property industry to get their take on the last 12 months and predictions for the year ahead
Simon Anderson, director of asset management at Ellandi
Without question maintaining a positive cashflow for landlords, engaging with occupiers and providing a safe shopping environment have been the main focuses in 2021. Due to factors such as the rent moratorium and government lockdowns rent and service charge collection is still lower than historic levels and significant arrears from 2020 still remain.
A proactive approach has been undertaken to regularly communicate with occupiers and in a vast majority of cases a fair proportion of the financial pain has been shared from both landlord and tenant to ensure lenders are satisfied and that essential services are maintained on site. Centre Management have worked very hard to find cost efficiencies on service charges and they have had to educate the public to adhere to government guidelines. Early planning and learnings from 2020 have formed the backbone of asset management strategies in 2021 and beyond.
David Cohen, director of restructuring and investment at Ellandi
During 2021 we have seen investor appetite for shopping centres increase significantly and total volumes for the year are expected to eclipse £1bn – a first since 2018. At Ellandi we have been busy working in partnership with investors to buy and bid on retail centres and we expect more of the same in 2022. Over the past 12 months, our involvement has been more weighted towards NPL transactions, but I believe we will see a greater volume of activity on the equity side during the year ahead. This will continue to be based upon deliverable and robust business plans, utilising our unrivalled data and occupier relationships, which provides us with better insight than anyone else into how town centres are evolving.
Eoin Conway, director and chief operating officer at ESTAMA UK
The impact of the pandemic is likely to linger into 2022, particularly surrounding rent arrears. As landlords and lenders look to recoup outstanding arrears, it is imperative that landlords work with their tenants to find solutions to suit both parties. Differing financial and personal circumstances means adopting a case-by-case strategy is the best route to negotiating a positive outcome for all.
Footfall at shopping centres has increased throughout the second half of 2021 and is set to continue to rise in 2022; keeping tenants in place is vital to supporting this trend and without effective cooperation, landlords risk losing tenants and customers. A strong approach to maintaining and developing commercially viable retail destinations is to create the right balance of leisure and retail options to drive visitor numbers.
Katherine Croom, managing director at Sorbon Estates
Consumers want high streets to be more than just a place to run errands; they want uniqueness through independent businesses. Despite the pandemic seeing a growth in online sales, on the high street people are striving for a multitude of experiences, resulting in the growth of concepts like Boom Battle Bar and Gravity. Once again, the casual dining market is booming, with more people eating out than before the pandemic.
Maidenhead itself is going through major regeneration. Our scheme at Waterside Quarter will address the lack of casual dining and leisure in the town centre, deliberately targeting independents rather than courting national brands. An increase in residential space is also contributing to Maidenhead’s trajectory to become a thriving location, with 260 new waterside homes, new schemes such as The Hub’s private rented scheme and ours on Park Street and West Street, adding over 100 homes. All of this brings people to the area, creating demand and footfall for an increasingly diverse high street offering.
Hannah Grievson, property director at Sloane Stanley Estate
The pandemic has caused individuals to reassess their relationship with shopping, triggering a shift towards supporting independent, local, and sustainable brands that offer something unique and value-added.
We have witnessed first-hand the strength of the community and demand for quality local retailers providing essential and sustainable services. Thus, landlords are experiencing mounting pressure to create retail spaces that are different, exciting, engaging and versatile, whilst also having community woven into the fabric of the everyday shopping experience and being able to flexibly respond to ever-changing consumer needs.
Sloane Stanley’s “shops-on-demand” leasing strategy, which offers pop-up shops and short-term flexible leases, does exactly this. By responding to changing consumer preferences, we create a more relevant, localised offer of independent and established retailers for our community, so residents do not need to travel far to get what they want.
The pandemic has proven, more than ever, the need to facilitate a flexible and responsive offer driven by consumer demand. We must acknowledge the changing landscape, working together and respond to trends and demands in the short-term, constantly adapting to best support our retail tenants and the needs of our local community in the long-term.
Nick Hilton, partner within the retail and leisure team at Workman Placemaking
Retail bounced back strongly from Covid, and (new variants notwithstanding) I would expect that to continue into 2022. Consumers have been out and about again, spending any cash they’ve been able to save. This year, the Christmas month has been extended to a festive quarter, with shopping starting earlier than usual.
Data is queen and king: it will remain powerful into 2022 and beyond. We’ve seen a rising number of turnover leases, so we are analysing increasing amounts of turnover information. Real estate owners are gaining ever-greater insight into how their occupiers are trading, and have more tangible information at their fingertips than ever before. From turnover information to customer counting and engagement statistics, we are collating this information and presenting it in ways that allow clients to make informed decisions.
Further into 2022, we are likely to see a renewed focus on measuring data around energy consumption in retail spaces, to create a base position from which to build towards ESG targets. Building owners are keen to create social value and community focus, along with a strong emphasis on incorporating biodiversity across their portfolios.
Catriona Hunter, director at CBRE Investment Management
The past year has been challenging but we are proud of how the destination has, continued to create experiences and opportunities for our visitors. Despite the effects of covid we delivered a fully refurbished scheme and this is a huge milestone for us. The dedication and commitment from the whole team has been incredible and we have created a space that incorporates great retail and restaurants, as well as holding the community at the heart.
Sustainability continues to be a focal point for us and we have incorporated some great sustainability-themed initiatives this year, and this is something we are looking to grow and develop for 2022. This year, we created a community forest as part of our Christmas celebrations working alongside some charities within the local community such as Islington Forest for Change to demonstrate the importance of climate change, launched a sustainability Market, as well as collaborating with Love Not Landfill on an exclusive and hugely popular pop-up. We will continue to be an inclusive community, providing opportunities for our visitors, and our retailers who are all part of Angel Central.
Dan Mason, managing director at Realm
During the months we lost to lockdown, the seismic changes in the public’s attitude to climate change and wider environmental concerns gathered pace and the business community has taken notice. This growth of conscious consumerism has been a challenge for the industry and placed a lot of retailers on a different path but one that ultimately benefits everyone.
We are on a path of growth as a business in our own right at a time when the institutional appetite from the outlet model is growing but where the depth of experience for this way of working is still limited across the industry more widely. We are specialist operators, with an appetite to grow our assets under management. There aren’t many of us out there so we are excited to bring more clients on a journey to see how turnover lease structures and the more collaborative landlord and tenant relations synonymous with outlet operations can bring meaningful returns.
Another major focus for 2022 and beyond will be the continued drive towards ESG improvement. In our experience, our clients (and their investors) are becoming as interested in ESG credentials as anything else.
Justin Meissel, chief investment officer and managing director Europe at Henley Investments
Our retail assets were all acquired post the onset of Covid-19, so whilst some retailers and owners struggled through 2021, we weren’t caught off guard by it. As such, our biggest challenges have been around finding more opportunities where our capital and skillsets could be put to work to help fix problems. However, we were still able to complete a few acquisitions and opportunistic disposals throughout the year.
Many retail investors are still figuring out what role ‘retail’ should play in this post-covid world and there isn’t a one-size-fits-all approach. Levelling up on leisure can be beneficial to the scheme, but it’s really about what’s right for the local offering, the community and the location. We remain committed to the belief that flexibility and agility will remain key.
We all hope Covid-19 will subside, and there will be more stability and certainty, but as the recent supply chain shortage and resultant inflation has shown, there will always be concerns on the horizon. Retail will hopefully recover sufficiently to be able to respond to these challenges, as retailers pivot from survival mode to being able to adapt.
Harry Pickering, head of UK retail at Schroders UK Real Estate Fund
The abyss for the industry that was Christmas 2020 was one of the most worrying periods in our collective memory. Would there be a retail market to return to when we emerged from lockdown? The answer, we now know, is yes. And a far more positive one than we imagined. Many businesses were more resilient than we thought.
What has been refreshing is that the circuit break terminology applied to the virus spread, actually applied to our industry too. COVID forced many companies to restructure and become more robust. Many retail brands were forced to remove the unprofitable parts of their operation and fast track much needed change. Ultimately, since the latest lockdown ended, we have seen what we hoped was true: the UK shopper still wants to go shopping. They want more diversity from a shopping trip and the growth in independents has met this demand. Footfall is certainly not yet back to levels seen before Covid struck, but basket spend is up – it’s good progress.
Just as retail businesses reset, retail landlords considered retail within their portfolio differently – previously the obsession with covenant was stifling retail’s necessary evolution. The demise of many major chains lessened the grip that ‘covenant strength’ had over the industry.
As retail valuations inevitably dropped, space was made for leasing decisions based on what the consumer wants and what a business could offer, having less emphasis of an occupier’s financial back-story. Previously, some would suggest tenants were only considered by landlords as part of an income stream and Covid woke the industry up to their clear shared agenda. A partnership model was imposed overnight and there is now a far greater understanding between landlord and tenant of each other’s businesses and cash flows. This can only be a positive step forward.
Matt Slade, retail director for Quintain
The retail destinations that have performed the strongest over the past year are those that have a clear sense of purpose – and where that purpose is not simply providing blank spaces for transactions. Quintain’s vision for retail and leisure at Wembley Park is that of a 15-minute neighbourhood where everything you could want, or need is within a short walk.
Retail property managers will need to take a more active role in curating communities. Retail places cannot just rely on the attraction of retail prices, leisure, F&B, or even more outdoor spaces, but they must reflect an entire community’s needs. Over the past year, we have seen the provision of health and education pop-up spaces in shopping centres to accompany this, and this is likely going to be a theme we will see more often over the next year.
While ‘placemaking’ has been a buzzword for years, 2022 will see the retail property sector further expand its focus beyond bricks-and-mortar to what brings these spaces to life: people.
Neil Wotherspoon, partner and head of Edinburgh office at TFT Consultants
The global supply chain has been heavily impacted by Covid, so delays and uncertainty around construction programmes remained even once sites were fully operational. one approach to mitigate that risk is by contractors buying materials in bulk to insulate from inflation further down the line.
As well as increasing material and labour costs, owners of retail property must consider the expectations and attitudes of their occupiers, which track customers’ changing priorities. As the shape of retail continues to shift, managing a portfolio requires some vision and investment, particularly for older centres which can be rejuvenated for a more modern clientele. Where those solutions can be found, they represent a more sustainable solution than demolition and development from scratch in many cases.
With no new retail developments coming through the pipeline, the focus will be on enhancing existing retail, particularly retail parks, to make it more experience-led and better adapted to a full day-out experience, coupled with convenience features.
I believe there is still cause for optimism although the reality is that landlords and developers will have to work harder than before. By creating mixed-use destinations including retail and leisure, operators and landlords can continue to perform well.
Time Buckley Woking
Managing the effects of the pandemic on the delivery of Victoria Place, the £700m regeneration scheme in Woking Town Centre has been our main focus in 2021.
The real challenge has been the potential for disruption to the supply chain and workforce as the construction of the hotel and residential parts of the scheme intensifies ahead of the launch in 2022. We have managed this by ensuring there is transparency and openness with partners in the local community and our tenants. This approach has been key: everyone involved shares a common goal to open a high-quality mixed-use destination in the heart of Woking that will make a significant positive contribution to the town’s growth and future prosperity.
Delivering a unique experience for visitors that not only surprises and delights at the time but is one they share via social media and word-of-mouth to encourage their peers to visit will be our focus in the year ahead. That requires close working relationships between the property management team, the tenants and head office teams, all of whom need to share common objectives. It also needs to recognise the value of creativity, innovation and genuinely understanding the drivers of consumer behaviour.
Neil Churchill, centre director at Festival Place, Basingstoke
The world of retail has continued to evolve over the last year. And while the retail property market was already under pressure, the pandemic has resulted in increased difficulties and complications for both landlords and occupiers. From a centre management perspective, it has forced a wholesale change upon managing relationships with our occupiers, requiring us to be more collaborative, more data-driven and more responsive to challenges.
These unique challenges also present fresh opportunities for the coming years. With some local high streets already outperforming major city centres, the shift to local shopping/dining along with a demand for an increasingly diverse offer is accelerating.
Given the positioning of Festival Place – both a town centre and destination, this is a trend we are monitoring with great interest. Across the industry, there is also a growing opportunity to convert underutilised retail space into an engaging leisure offer and to explore the shift to a broader mix of uses. For 2022, Festival Place remains committed to both its operators and visitors while making sure our ambitions serve the best interest of the people of Basingstoke.
Ed Corrigan, assistant leasing director at St James Quarter
The last year has seen a period of accelerated change across the retail landscape, trends that were already very much on the cards have moved forward rapidly. At St James Quarter we were already well positioned to capture these trends. The role of retail in its community is changing. Housing, hotels, leisure, events; these are key components of SJQ. Flexibility is also important with the enabling of different uses and experiences to be added and changed over time. There is a growing recognition that in the world we now live, the ability to change, and change quickly, is vital and this is built into the fabric of new, modern projects such as St James Quarter.
Prior to the global pandemic, we had largely established the key anchor tenants and a critical mass of supporting occupiers. The pandemic paused momentum for everyone and, in Scotland, all construction activity was halted for three months. Despite this, because of the strength of the city and because the retail element of St James Quarter was so strategically integrated within the surrounding streetscape, we were still able to open with over 70% of stores trading and over 85% let.
Michelle Percy, Director of Place at Newcastle City Council
Throughout 2021, we’ve been working with local businesses on our plans for the City Centre Transformation Programme (CCTP) in Newcastle to deliver a series of impactful interventions across key streets and thoroughfares. Although this is part of a long-term vision, the pandemic has accelerated the need to create a city centre that is no longer dominated by shops but encourages a dynamic mix of uses. By investing in and transforming our city centre we can support the city’s continued recovery and secure a sustainable future for the next generations.
After consultation on our proposals for the City Centre Transformation Programme (CCTP), from January we will be starting works to implement the vision of the council and its partners on some of the key streets and thoroughfares in the city centre. We are targeting completion of this first phase of the programme at the end of 2022, so it’s full steam ahead to deliver on our promises and create a city centre of which Newcastle can continue to be proud. Newcastle is already an amazing destination, but 2022 is the start of our journey to secure its future and ensure all generations feel right at home.
Daniel Tomkinson, general manager for London Designer Outlet
With footfall and sales nearing pre-pandemic levels as we approach 2022, it isn’t enough simply to view the past two years as a blip in the history of retail and carry on as normal. More than ever, we need a stronger focus on improving relationships between landlords and tenants. One measure that would help is introducing turnover-based rents, which London Designer Outlet has championed since we opened our doors in 2013 and one which has proved invaluable when working together through the pandemic.
Asset managers and developers need to be savvier in implementing the digital infrastructure that helps our brands create an improved physical retail experience. This ranges from click-and-reserve schemes to loyalty programmes, with data that drives decisions and creates new opportunities to benefit business and consumer.
Perhaps most importantly, 2022 needs to be the year that we mandate for improved sustainability across any agenda. A strategically managed, well-run retail destination means we can strive for common goals in a joined-up way – landlord, asset manager and tenant – to implement improvements and meet the changing needs of the industry and our customers.
James Morris-Manuel, managing director EMEA at Matterport
Professionals will continue to pursue a hybrid approach to retail. The impact of Covid-19 has led to a transitional period within the industry, where the real and virtual worlds will merge together to make a heightened shopping experience for consumers. In 2022, hybrid retail will be much more established than in 2021, thus increasing the number of virtual stores, interactive stores and eCommerce that will give customers a new experience in the high street.
Shops will become showrooms using digital twins. Showrooms reduce the costs for business as they won’t have to have as much stock in store. All products will be viewed in-store and delivered home, rather than taking products home the same day. By organising locations in this way, premier products can be showcased while also minimising the costs of storage. The approach will be especially useful for larger items such as pushchairs and TVs, where customers will try them out in a shop and then the product will be sent home. Digital twins will help build these showrooms across sites and locations, mapped accurately so customers will see what the shop has in store for them.
Daniel Graham, director at OnBrand
With more consumers used to immediate online deliveries, our marketing messages have centred around personal contact, unique brand engagement and slick marketing channels. We have seen in-person events back on the agenda in the last quarter of 2021, and are currently planning Awards Ceremonies, Charity Fundraisers and Family Entertainment events for early next year.
The retail moratorium from eviction was extended at the end of June 2021 and now ends on March 25, 2022. At this point and in the run up to it, the effective financial funding that has come to retailers by way of staving off meeting their rent will push a number of retailers into closure, and cause headaches for retail property owners. Filling void spaces and encouraging new ideas, innovations and new business models will need financial incentive and further support from the retail property industry to ensure mid to long term footfall and spend is sustainable and viable for a lot of community schemes.
I hope that the catalyst of the pandemic causes shoppers to look again at what they really want and that we will see greater partnerships between landlords and retailers, more transparency and common interests being worked on together to reinvigorate our town centres and communities.
Chloe Keith, managing director at Toolbox
Our main focus for 2022 is where physical meets digital. With a focus on the digital aspects during the pandemic, we expect a strong digital presence in 2022 to help drive the physical. Retail needs to create memorable and purposeful reasons to encourage communities to eat, watch, play and stay, so we need to focus on providing unforgettable experiences they cannot get online.
We have started seeing an increased interest in sustainability. As shoppers continue to embrace sustainability and research continues to enhance, we expect to see an even greater shift in the retail industry that puts sustainability at the forefront of their marketing. Retail will hold more exciting initiatives that focus on sustainability to encourage shoppers to visit.
The main drive for sustainability has come from platforms such as TikTok. TikTok has created a space that combines consumerism with activism and education. Shoppers are more aware than ever of the impact their habits have on the planet. This has created a demand for retail events that focus on sustainability. Therefore, we can also expect TikTok at the forefront of consumer trends.
This was first published in Retail Destination Fortnightly. Click here to subscribe.