We recently attended Bisnow's London Retail event where our Head of Planning, Julian Stephenson, was in discussion with Jaap Tonckens, CFO at Unibail-Rodamco-Westfield (URW). Over the course of a really interesting discussion, Jaap highlighted URW's practice of simply removing dead wood form their schemes: if you don't drive footfall, then why are you there?
This talk highlights a key issue across the market: that landlords and tenants in our town centres and shopping centres need to work more closely together. The world is changing, leases are shorter, consumers no longer behave in the way they once did, margins are tighter, expectations remain high. But these retail dominated centres still serve as vital infrastructure not only for the retailers and other occupiers, but also for the communities they serve. Sharing information is key to success. Retailers need to share their turnover data and be open to the idea of using spaces locally to service their last mile and click and collect, they need to let their landlords understand their businesses. Landlords in return need to provide flexibility, reduce the capex requirements and do their part to drive footfall with a programme of events, top notch public spaces and facilitates, pleasant environments with a mix of uses that keep people there for longer and, crucially, using the centres regularly.
We advise a number of public and private asset owners across the UK, with the specific advice that collaboration will help these assets adapt and succeed. That isn’t just a landlord and tenant relationship, it goes beyond to take in the local authority, planning, adjoining landowners, business owners and the community. Mixed use, vibrant, interesting centres at the heart of the community, reflective of their location and its characteristics will be those that are held up as examples of success.
Very few centres will have the luxury of demanding turnover figures that kick out the poorer performing tenants, but the key lessons that other centres can learn from URW are replicable: listen, collaborate, be flexible, engage your consumers and don’t expect things to change overnight.
Tonckens said in order to succeed in retail real estate today, owners have to leave behind a mindset where they leased a store to a retailer for the highest rent possible for the longest time possible, in order to achieve a high capital value. “You need to get involved in your tenants’ business,” he said.