At a time of uncertainty for the world economy and of evolution in the world of retail, the delegates and exhibitors at the annual British Council of Shopping Centres (BCSC) conference had much to mull over this week.
Along with the usual deal making, wine drinking and contact building of such events, there were plenty of thought-provoking debates regarding the future of physical retail stores and the major developments that support them.
The consensus view from the attendees Retail Gazette spoke to at the event was that there are some very serious challenges facing retail property in the UK at present, such as high levels of vacant units, anaemic bank lending, and obstructive planning procedures.
Of the major property owners present at the Manchester Central Exhibition Centre attitudes remained bullish however, or at least officially, even as stock market prices tumbled in financial markets around the world.
In a typical comment from the event, one asset manager told me: “It will be very interesting to see which way the economy goes in the next 12 months, however we are certain that we are in a very strong place at the moment.”
This confidence is explained by the big players in the industry all almost exclusively owning property in thriving prime or super-prime locations, while it is the secondary centres, typically owned by smaller landlords, which are the ones struggling in these tough economic times.
Statistics produced by the BCSC for this year’s event show that 11 per cent of all retail units in the country will remain empty on a long-term basis, and the group’s Chairman Richard Akers has called for reform of rental rates and empty property charges to try and address this problem.
Opinion on the conference floor about how to revive struggling high streets seemed to be split between those who want strong action taken by local and national government’s and those that think market forces should be allowed to reshape town centre retail around permanently altered levels of demand.
Whilst most believe that there are simply too many shops due to the growth of online retail and improved major centres, Geoff Nicholson, Managing Director of consultancy FSP, told this publication that while most struggling centres certainly are in a state of obsolescence, only a small minority have become obsolete.
Or in other words, it is not too late to save the high street and that abandoning ailing centres is not the only answer. Many would disagree however.
Firms dealing primarily in prime, such as Hammerson, Land Securities and Westfield, need not concern themselves with the plight of secondary sites, with occupancy levels at their numerous retail cathedrals well above 90 per cent and demand for units at their top location still very high.
Many foreign invaders, such as Forever 21 and Uniqlo, are increasingly targeting stores in London and other major centres due to the resilience of sales at these locations.
It is perhaps revealing though that the only retailers exhibiting in Manchester this year were the major supermarkets, as few sectors outside of grocery are contemplating significant expansion at this time.
Cranes have halted across the country as finance for new sites becomes harder to secure and although existing shopping centres are currently meeting demand there is no room for complacency from the real estate giants.
Some estimate that in the near-future multinational retailers will only need about 50 well-positioned stores nationwide to service most of the UK population, down from around 300 a decade or so ago.
As one property professional pointed out to me however, the 50th best retail centre in the UK right now would probably not be ideal for a Superdry flagship.
And that is what most chain stores of the future will be, flagships, which is why almost all the real estate giants are busy extended and upgrading their portfolio to accommodate retailers’ growing ambitions.
As Westfield Stratford has shown, retail theatre, interactive experiences and multichannel services look to be the future of the modern shopping offer and to replicate this offering nationwide, the country is going to need much more new prime space than will be created at the Trinity centre in Leeds - the only confirmed large mall construction currently planned over the next two years.
If anyone needed inspiration on how to manage and complete these huge projects they could have done worse then hear the presentation by Ardent’s Joint CEO Roger Madelin on Tuesday about his company’s development of the huge King’s Cross site in central London.
He explained how extensive research, active involvement in a community, the creation of something inspiring and groundbreaking architecture should all preoccupy the mind of the modern property professional.
In a private discussion, Karl Kalcher, Managing Director of innovative consultancy Mindfolio, admitted that local religions had even affected the design of a major project he was undertaking in the US.
With all this in mind, the road for retail property is possibly not as smooth as most industry professionals would like to let on but what the BCSC showed was that the industry seems prepared for the obstacles that lie ahead.