RETAIL DESTINATION spoke to key players in the industry about their take on 2022 and their predictions for 2023
CRIONA COLLINS, DIRECTOR, HEAD OF RETAIL AGENCY AT LAMBERT SMITH HAMPTON:
“This year, while in the process of recovery, two factors have been highlighted. Firstly, shopping centres remain important to their communities; and secondly, the team behind a destination plays a significant part in its success. Ultimately, a destination is nothing without its team, and this will separate the strong from the disconnected. If a destination is serviced correctly and everyone aligns with the same vision – understanding the customer, supporting tenants, and recognising the wider community – they will see the dividends of renewals and brand investment. As we enter a difficult economic period, brands will choose to invest in existing stores which bring the most value, and regional shopping centres serving vibrant communities will sit high on the agenda. Asset and brand investment, alongside recommitment, are components that demonstrate a destination’s success. If a location understands its demographic, and mirrors this through its retail proposition, it will be able to execute an abundance of brand regears, from established and independent brands. Tenant mix is also imperative, to keep the offer fresh, exciting, and relevant for visitors. Brands need to fit seamlessly, making it easier to deliver experience and memorable customer service. Build a great team, and this success will follow.”
RICHARD STONEY, PARTNER IN THE RATING TEAM AT GERALD EVE:
“The retail market has clearly suffered a battering in recent years, having already been squeezed by structural economic, social and demographic changes, not least the rise of digital at the expense of the High Street. Layer onto that the pandemic lockdowns, from which the sector is still in a state of recovery. Then along comes the cost-of-living crisis, with inflation putting a squeeze on consumer spending, while also driving up the costs of doing business. Not to mention staff shortages, caused at least in part by Brexit. Who would be a retailer?
“Nevertheless, within the gloom there are glimmers of hope. Looking at business rates, the scrapping of downwards transitional relief was a welcome change to come out of the Autumn budget. Retail property rateable values have fallen by 10% across the UK but this masks huge variation in change in value with modest increases in some areas to significant falls in others. The 2023 revaluation will bring about cost reductions for retailers for the forthcoming year.
“However, with CPI remaining high and the link between CPI and business rates remaining in place, it’s likely that this year’s reduction in rates will be clawed back in 2024/25. In short, the reduction in business rates will be short lasting.
“Overall, the risk remains that despite some short-term relief we risk seeing rates return to levels that will still bring risk to businesses, threatening the nascent and very fragile high street recovery. Without breaking that all important link between rates and CPI, business rates will still pose a real threat to retailers and it will take concerted government action – that long promised root and branch review – to properly address this. The hope for the year ahead, then, is for real reform, rather than yet more sticking plasters.”
JOANNA LEA, DIRECTOR OF RETAIL AT GROSVENOR:
“Faced with changing consumer expectations, climate emergency and inflation, retailers and partners must adapt fast to secure future opportunities. How can you ensure success? Here’s my take.
“One positive from the pandemic was the reminder that physical retail remains central to long-term brand success. Brands may only need one store worldwide, but consumers crave personal connection.
“The connection between consumer and place has never been more important. In London, consumers are migrating from big box retail to backstreets that evoke a sense of discovery, seeking out the unexpected. Grosvenor’s West End destinations, Mayfair and Belgravia, are by nature side streets that offer curious places to unearth an array of independent occupiers.
“Grosvenor’s South Molton Triangle project exemplifies this. Celebrating Mayfair’s heritage, historical buildings are being adapted to repurpose space, linking flagship units with compact lanes of micro-spaces surrounded by artwork-inspired public areas to create an identity.
“Development starts on-site next year with South Molton Street, and our team is taking a different approach to creating a place. Bringing fresh perspectives to tried-and-tested methods, we are deliberately working with non-real estate focused consultants to ensure the sense of identity and community is truly delivered.
Brands building in-store experiences need property owners to create with. Grosvenor will continue supporting brands in this mission. Our partnership approach to occupier relationships ensures our destinations retain a variety of independent brands and evolving consumer experiences.”
NEIL BARBER, LEASING DIRECTOR AT CAIN INTERNATIONAL:
“Amidst the political and economic turmoil, the past year has highlighted the resilience of retail. Retail destinations have emerged from the pandemic with an increased mix of uses that better cater to the ways people live, shop and play. It has been encouraging to see new concepts emerge to make use of under-used or meanwhile space, such as Gravity at Wandsworth Southside, as well as the likes of the New Meta gaming arena that we introduced at Islington Square over the summer.
“Destinations that feature immersive leisure, coupled with independent retail and hospitality, will go from strength to strength. They’re also better placed to appeal amid the rising cost of living, with people looking for full-day enjoyable experiences.
“We hope 2023 will see imaginative new retail formats, reflecting how customers want to experience physical places. Part of that is down to the retail destination in offering flexible spaces, both in layout and use, and characterful ones that appeal to guests.
“Reflecting retail and hospitality’s roots, the sector will continue to deliver on creating shared spaces for the community to enjoy – and we hope that’s reflected in a structural reform of the business rates system that allows high streets to thrive.”
DAN MASON, MANAGING DIRECTOR AT REALM:
“Put simply my prediction is that outlets will do well. Why is this?. I see it as all about three Rs. The first is the resilience to soak up declines in consumer confidence – the proposition of outlets has enough stretch to appeal to those who need to save money as well as those that want to – whether shopping down a brand or staying with the same brand but switching from full price its win:win for outlets for the foreseeable future.
“The second R is reactive – courtesy of the way data is so deeply embedded into the operating model, outlets are a place where intervention to improve performance is the norm – the granular figures can be interpreted to highlight areas where stock, layout, pricing, promotion, conversion could all be influenced. It’s our not-so-secret weapon where even marginal gains can make a difference.
“Finally, we have relevance – and I am in no doubt that 2023 is a year of opportunity for outlets – to entice new customers and re-engage with lapsed ones. Whilst many criticised Black Friday for its smoke and mirrors use of promotions that didn’t necessarily stack up, outlets have matured; they are trusted, and they offer value 365 days a year not just for a flash sale. For the cost-conscious shopper, outlet retail just makes sense – a brand of lifestyle experience-based shopping that covers both head and heart.”
MARTIN PERRY, DIRECTOR OF DEVELOPMENT, REAL ESTATE, EUROPE AT NUVEEN REAL ESTATE:
“The Autumn Statement has put a squeeze on the pound in the pockets of everyone across the income spectrum, but St James Quarter is geared to draw across the breadth of the market and appeal to all price points. We’ve never set out to market ourselves to an exclusive audience: our diverse set of retailers means that consumers can be more savvy with their spend, whether it’s finding cheaper alternative for buying staple clothing, or saving up for something special.
“People however now expect more than retail therapy, and want immersive, interactive experiences on top of this. To that end, over 100,000sq ft of our asset is leisure-focussed, which we see as complementary to our retail offering and a catalyst to increase footfall.”
ALEX BUTLER, A PARTNER (NATIONAL INVESTMENT) AT UK PROPERTY CONSULTANCY ALLSOP:
“While the economic picture is challenging, retail is looking robust relative to other asset classes at the end of 2022.
“Liz Truss’s mini-Budget knocked the market’s confidence, but it had a much smaller effect on retail than other sectors given that retail pricing had already gone through a severe adjustment with the rise of online shopping and the pandemic. However, shopping centre owners will be carefully watching what happens with some larger occupiers such as Wilko, who may seek to jettison weaker stores but keep the higher performing ones.
“There is cause for optimism on the high street next year. Despite the cost of living crisis, many occupiers are looking to expand including Moss Bros, Poundland, Aldi and Pret. In addition, retailers will be hoping their rates liability will be lower following the next nationwide business rates revaluation in April 2023. Meanwhile, my colleagues in Allsop’s auction department are seeing high demand for prime high street property, with yields remaining strong.
“Overall, retail is looking like good value for investors, with Israeli firms particularly active this year, while next year we’d expect more U.S. investors will be keen to explore their options. It should be a busy year for retail.”
TIM BUCKLEY, ASSET MANAGER AT MOYALLEN:
“I expect to 2023 to be another tough year for retail, with the main pressure being exerted by reduced consumer spending. While the government’s intervention on business rates is welcome, running costs of business will continue to be a challenge and it will be hard going for a lot of companies throughout the year.
“These same challenges will affect leisure and F&B too, albeit some of the simpler luxuries might show resilience as people look to secure some enjoyment in more value or experiential-related environments.
Residential lettings will probably suffer a squeeze, but better quality curated residential schemes will continue to lease up, particularly where they are a part of something bigger: a wider community that operates with complimentary retail, F&B and leisure options.
“In Woking, for example, the Marches at Victoria Place has been a significant success and, given all the positives for the town, I do not expect to see any great slowing of the residential demand. Quality counts, and towns need to provide good public realm, excellent transport links and a broad variety of offers to remain relevant.
“It is a great time to be a small and successful retailer as viable opportunity is now present in most locations. As an industry, we should be looking to nurture these fledgling businesses to be our future occupiers. A sense of purpose, providing a different offer to an ever-curious consumer, should succeed and, with some patience, we may discover a range of exciting new multiple retailers.”
SAMANTHA BAIN-MOLLISON, RETAIL DIRECTOR AT SHAFTESBURY:
“Our primary objective is to create great partnerships with occupiers who complement our values and ethos. At Shaftesbury we’ve consistently focused on providing fulfilling and interesting destinations for people to live, work and visit, and will continue to do so into the future.
“Looking ahead, we want to see proactive change to address long term issues with government policies and will continue to lobby for quicker policy wins to ultimately support all the retail, hospitality, and leisure businesses – particularly independents and start-ups. It is these types of occupiers whose point of difference and ability to be as creative as possible in our locations contributes to the success of London’s West End.
“Shaftesbury is always on the lookout for highly sustainable, transparent, and exciting brands and seeks to introduce more initiatives to assist these types of occupiers. The intention is to work closely with them in sharing our own data analytics and support them with our dedicated communications and events strategy.
“Investment in public realm, connectivity plus creating exciting and memorable marketing campaigns and events for all our villages, such as Seven Dials, are all essential elements to support our occupiers and help navigate through the next year and beyond.”
THOMAS INGHAM, PLACE AND MARKETING MANAGER AT CBRE LTD:
“From a leasing and new openings perspective, 2022 has been a great year for The Yards, Covent Garden. We are now coming towards the end of the destination’s leasing campaign, following the completed £8m refurbishment providing flagship retail and restaurant space. Attracting both independents and big-name-brands, The Yards has made a name for itself as the place to be, both as a retail destination to peruse and a day-to-night dining hub in central Covent Garden. Looking at the year ahead, we know that the Cost-of-Living crisis is driving consumers to really consider their spending habits, and this will be a strong focus for us in 2023. With a wide variety of retail and hospitality locations in the capital, there is a need to be offering higher quality experiences and products which will capture consumers’ attention. Our latest positioning, ‘Only at The Yards’, is dedicated to creating lasting memories that cannot be found anywhere else. We wanted to personalise this activation and have secured a first-of-its-kind geolocation technology, to provide bespoke and targeted gifting offers from our participating retailers. It has been great to be able to work collaboratively with Longmartin Properties, the joint venture between Shaftesbury and The Mercers’ Company, Knight Frank and the occupiers to see the transformation of this destination. Looking ahead we want to focus on providing sustainable events and activations, as part of the Covent Garden community and for Longmartin Properties.”
NANCY CULLEN, CHIEF OPERATING OFFICER, SPACEANDPEOPLE
“As with many aspects of the retail sector, commercialisation is not immune to the vagaries of the general economic climate. While there has been steady growth across all aspects of on-mall activity in 2022, we do expect the market to be price constrained over the next 12 months as the effects of inflation and rising interest rates impact consumer spending. However, we have seen a number of new trends which have excited us for 2023!
“Throughout 2022, brand activity has increasingly returned to venues and face to face engagement remains a key sales and marketing driver for brands, as well as part of their social feed and advertising strategy. We have seen a noticeable number of high-volume sampling campaigns that have taken place over the last year particularly focused on vegan, health and protein foods.
“We also anticipate a growth in brands and products that reinforce sustainability and eco-conscious messages. Our team are working with a number of brands that have a strong environmental message and similarly, solar energy/electric vehicles are currently very much part of the bookings mix.
“Short-term and pop-up retail have been strong in the post-pandemic era and there have been several new entrants to the market such as Frenchie Frenchie and Pop Specs. We do see this situation continuing, particularly with products such as our Rock Up and Pop Up offering, whereby we provide a complete pop-up retail solution, enabling digitally native and online brands to access venues. In an uncertain economy, flexibility is key and the ability to pop up remains a strong proposition.”
JANINE CONTANTIN-RUSSELL, MD AT ICON OUTLET AT THE O2 AND THE ENTERTAINMENT DISTRICT:
“Icon Outlet at The O2 has been delivering a compelling destination-focused offer for years. It’s ingrained within our values and our priority is to really ‘wow’ our visitors, delivering a 360-degree experience and setting new benchmarks time and time again for sales and footfall performance. This is a strategy we’ll continue to implement into 2023 and beyond.
“Looking ahead, it’s also crucial to ensure we remain responsive to how consumers want to engage with retail, anticipate how they want to socialise and how they want to spend their time. Given the current climate, we are continuously looking to highlight more effective ways for consumers to enjoy our space and showcase the varied offer available at Icon Outlet and all that we have at the destination. As such, our approach won’t change but rather come to fruition. For example, one area we are keen to develop further in 2023, are our brand pop-ups. Following considerable success with brands like Hackett, Reiss, Frugi and Zwilling this year, we believe it hits a sweet spot for the landlord, brand, and consumer, mutually benefiting all parties. Pop-ups allow brands to test the water, often with seasonal stock, before potentially committing to a longer-term store, while consumers appreciate the sense of ‘newness’ on every visit to the destination. Finally, landlords are also able to keep their line-up flexible, novel and thus enticing.
“We are committed to making 2023 Icon Outlet’s best year yet and are confident the groundwork we have put in place will continue to drive consumer and brand interest.”
CIARA DAFFY, ASSET MANAGER AT CBRE INVESTMENT MANAGEMENT UK:
“2022 has been an important year for Angel Central. We’ve diversified our F&B offering, embraced brand investment and enhanced our leisure proposition. Through proactive management, we’ve been able to use vacant units as incubator space for fresh ideas and local brands, from standalone concepts to wider placemaking initiatives. As we enter 2023, the collaborative tenant and landlord relationship, defined by consistent communication, will remain a significant priority, especially given the current economic climate. A new year brings fresh opportunity, but there will be headwinds and we therefore cannot be complacent about the role of destinations. As technology continues to advance, it’s important that retail experiences remain attractive, relevant, and innovative, and are able to flex with changing consumer habits and behaviours. ESG also remains key; retail brands and landlords should work together on practices such as energy saving policies and recycling quotas, to ensure that environmental considerations are at the forefront of any strategy, reflecting the priorities of the wider destination and its communities.”
HANNAH GRIEVSON, PROPERTY DIRECTOR AT SLOANE STANLEY ESTATE:
“It’s easy to lack positivity when looking ahead to the new year. We understand everyone will bear the effects of the cost-of-living crisis; however, this also provides real opportunities for landlords and tenants to embrace these challenges. Sloane Stanley continues to be pioneers with our ‘on-demand’ leasing strategy which helps attract creative independents to the King’s Road and Fulham Road. We have several detailed negotiations underway with numerous operators to extend and diversify our offering, exploring fitness, sustainability and re-sale, beauty, and the F&B sectors.
“Sloane Stanley will utilise the groundwork that we have built over the last few years to propel us forward as we enter a new era of retail. Our flexible pop-up capabilities mean that we can adapt to the market and modify our tenant mix with changing consumer habits, and with social governance at the top of our agenda, we will continue to craft a community which embraces innovation and creativity, supporting tenants, residents, and visitors. Our collaborative relationships with both the Chelsea BID and the Chelsea Design Collective cement the importance of community for Sloane Stanley, and we’re looking forward to continuing this approach throughout next year and beyond.”
PAUL CARTER, ASSET DIRECTOR AT GLOUCESTER QUAYS:
“Re-evaluating how places deliver for communities will be a theme that runs through 2023. With all the pressures faced by individuals and businesses, it’s so important that retail destinations play their part, giving new reasons to visit to maintain vitality. What we are doing at Gloucester Quays this Christmas provides examples of what we can expect more of next year. Giving a unit to a foodbank to store produce – to help vulnerable people and families at such a challenging time – supporting tenants with a ‘random act of kindness’ initiative for customers, and working closely with other stakeholders, from our local church to our chosen charity. Typically, Christmas-only community focus will extend throughout the year, and I see free events becoming more important in creating a great day out. Outlets will have plenty of relevance in 2023, combining popular brands with amazing value, so their curation will be equally important. The relationship between landlord and tenant has never been so close, and in places like Gloucester Quays we are working flexibly and fairly, to ensure our retailers have the incentive and opportunity to do what they do best – connect with their customers and create compelling reasons to shop, dine, or spend leisure time with them.”
GEMMA WARD, ASSOCIATE DIRECTOR, BUSINESS, SHOPPERTAINMENT:
“With 2023 being a stones-throw away, retail destinations are wondering what the bigger picture will look like in the new year. With many units remaining empty after the collapse of the Arcadia Group and Debenhams, and retailers vacating due to rising costs, landlords are struggling to fill the space.
But is retail really what’s needed?
Over the past few years, there’s been a demand in F&B and leisure, with an abundance of well-known names taking over former retail units. Landlords must delve further into creating a reason to visit their Centre – whether this is by transforming vacant units into community spaces or leisure facilities; footfall will stem from these and create a reason for both new customers and repeat visits.
Customers are of utmost importance, and we should be listening to what they want, as they are the reason for a retail destination. Free events, community initiatives and promotions with strong call to actions will continue to dominate 2023.
“We need to embrace the changing shape of retail destinations and only those that are forward thinkers and open to adapting the existing shopping centre model will see the growth that is needed to thrive in 2023.”
NEIL CHURCHILL, CENTRE DIRECTOR AT FESTIVAL PLACE:
“Against the backdrop of Covid and changing consumer habits, the challenge for us at Festival Place has been to ensure that the centre is as relevant today as it was when it launched 20 years ago.
“The demise of many ‘big-box’ retailers alongside evolving trends has resulted in a more hands-on approach to curating and managing a space that visitors want to come – and return – to.
“As a management team, we met this challenge head on during 2020/21 and entered the post-lockdown reality of 2022 with a defined vision and clear decision-making process. This process gave us the clarity and discipline not to make reactive leasing decisions but, instead, to remain patient and trust in our vision.
“This has allowed us to deliver more local and independent operators as well as increasing our provision of vital services, which enhance our connection with the local community.
“After a torrid time, some more encouraging signs emerging for the retail sector and we are certainly experiencing positive footfall and trading. We will, however, need to continue to rise to the challenge of delivering a varied and considered line-up of operators, alongside the provision of events and services that meet our local community’s needs.
MIKE SKYPALA, INDUSTRY LEAD, EMEA, AT TERADATA:
“As we settle into our “new normal”, people are now using both online and offline formats to shop, with in-store experiences seen as a chance to touch, feel and see the products, and many retailers following IKEA’s lead by showing consumers what a full “at home room” could look like in their retail spaces, making it a more visually-led interaction.
“This blended approach to shopping is likely to stick around, which adds a certain element of complexity for retailers looking to track and interact with customers on their purchase journey and understanding the profitability of each, with analytics helping to comprehend these shifts and changes in behaviour. It’s becoming harder for brands to fully understand the level of demand from their customer base and be ahead of what’s coming next, and there’s a lot of power to be found in retailers truly getting to grips with online and offline shopping journeys and understanding the full consumer picture.”
