Interesting and wide ranging piece in the Sunday Times on the future of the retail market in the UK. Whilst in the short term landlords and tenants may find themselves recalibrating how they deal with rent (and in our view it feels unlikely that the investment market will support a 100% turnover rent model), the longer game is perhaps of more interest and it is one that landlords need to start playing now.
We have recently launched our Retail Repurposing campaign in support of those clients who are proactively auditing their assets and their investment/development strategy. Whether the asset is an out of town retail site or embedded in a high street, this is undoubtedly the time to start thinking about the future. With the general downward trend in viability of bricks and mortar retail, investor landlords who, as the Sunday Times article suggests, put repurposing in the “too difficult” box for now because of the immediate financial metrics or viability may be storing up a problem for later. In our view now is exactly the time to formulate a strategy to revitalise or reposition an asset in order to protect, and ultimately drive, value.
There is no “one size fits all” model for repurposing retail assets – for some it will be a case of exploring the experiential market or increasing local community engagement to drive footfall (and localism is one trend we expect to come out of the last few months), for others it will be about wholesale movement away from retail. As ever in property, quality and location of the underlying asset will drive viability of any repurposed development and so approaches will differ.
However, the reality is that investors will not want to prop up unviable retail tenants with lower rents when their assets have more to offer them, and their communities, in a new form. Retail will undoubtedly survive, and thrive, in the new normal but it will look very different. Investors and developers need to think about how they adapt as well; the future is very exciting for those who can take that opportunity.
Landlords told to face a new reality on rents