I had the pleasure of speaking at the UK Shopping Centre Management Conference 2013  yesterday on social media and e-commerce, and the implications for retail and real estate. The conference had a record 400+ attendees and had an excellent agenda of speaking and panel sessions, in addition to networking and knowledge sharing breaks. The theme of my short slot centred around the merging of the virtual and physical space, in terms of social interaction and commercialisation.

Facebook’s daily active population at 665m ranks it third as a ‘country’ after China and India, Amazon generates revenues in excess of £4bn in the UK alone (>1% UK sales and growing) and they are also now straying into the online grocery market in the US. What happens next remains to be seen. For now, both social media and ecommerce are making their marks on retail and are likely to continue to do so from here on.

We are seeing a rapid merging of social media, e-commerce and physical retail, the potential for s-commerce, but the continued importance of the physical environment. In some instances we are seeing the emergence of ecommerce coming into the physical space (see Kate Spade/ ebay initiative in the US). We need to embrace the virtual world, to compliment it, or to truly differentiate to out-perform.

Unfortunately I was unable to stay for the entire conference, but from conversations I had with delegates and following updates on Twitter #scmc13, my take-away would be, that the market has accepted that change is here, and we are seeing an increasing willingness and appetite in the market to re-write the rulebook and to adapt.

Until next year’s event (or the Annual Showcase in Sept 13 , I hope as an industry we can continue the conversation in cyberspace. Whilst the BCSC LinkedIn group only ranks above the Vatican in population terms, with 2200+ members, it is a great place for us to continue the conversation, on what’s around the corner.

Well done BCSC and The Shopping Centre and thank you.

Source: mashable.com

Twitter: @JLLEMEARetail

When a colleague recently told me of the latest space saving office trend – to provide workers with ‘standing desks’, my first thought was that he had to be joking…!  The thought of rows of employees standing at their desks seemed too far-fetched and quite removed from my own experience of the work-place. Surely more of a fad than a trend I thought?

However, after looking into it, I think there may be some legs to the concept (!!). It is already becoming a trend in the US (with corporate adopters including Chevron, Intel, Allstate, Boeing, Apple and Google) and I think it has potential to move out of the ‘fad’ stage here.

The primary driver seems to be recognition from these companies of the importance of staff well-being and health. In the current economic climate getting the most out of staff is more important than ever. Research shows that the best companies to work for outperform the competition because they understand the clear link between healthy energised staff and the bottom line. Benefits of employee wellbeing policies can include:

• Improvement in staff health, energy & performance
• Increased staff engagement
• Attraction and retention of the best people
• Reduction in staff absence & related costs
• Reduce reactive health costs such as EAP’s (employee assistance programmes) & PMI (private medical insurance)

From the productivity standpoint (excuse the pun) – results are difficult to quantify.  However I suggest it would improve employee performance.  Whilst there is no direct evidence linking ‘standing desks’ to increased productivity – there is research linking long periods of sitting at desks with various health concerns, including obesity and metabolic syndrome. Too much sitting is also known to increase the risk of death from cardiovascular disease and cancer. 

Implementation of ‘standing desks’ as part of a combined approach to work space utilisation could also bring cost benefits to companies wishing to benefit from a more efficient use of space. A range of different working environments are required and evidenced in the very best examples of modern workplaces. Taking Vodafone as an example. At their six-storey building in Auckland they employ a variety of working arrangements.  Staff can sit at the same desk permanently; work at bench-height hubs catering for six to eight people or use smaller single stand-up desks.   Vodafone have acknowledged this arrangement saved them from having to build a whole extra floor – a huge financial saving, not only in terms of rent but also furniture and heating.

So – back to the original question of the blog – a fad or a trend? Well I would definitely put it in the fad phase at the moment as far as the UK is concerned.  I have heard reports of some lawyers opting for these type of work stations in the square mile, but not heard of wider adoptions yet.  What I would say is that what drives trends are underlying needs that are not being met.  Looking at the underlying cultural, economic and corporate real estate strategy shifts, I believe the needs are there.  So – definitely a potential trend to look out for.

One of the most notable news items this week for the retail sector is that the proportion of cash transactions at the point of sale decreased 10 per cent last year.

According to the British Retail Consortium’s (BRC) Cost of Payment Collection Survey, consumers are embracing alternative ways to shop using new technology. However,  paying with cash remains the most popular choice as 54.4 per cent of retail dealings are completed in this way.  Along with the publishing of these results, the BRC observed that there are “fundamental changes in the UK retail industry as customers embrace new technology and new ways to shop are producing major changes in the relative importance of different payment methods.”

The report, which includes nearly 10 billion retail transactions made during 2012, indicated that cash spending by customers fell nearly 10 per cent compared with the previous year’s results, as retail transactions made on debit cards and through relatively new means such as PayPal became more popular.

Although over half of all retail transactions are still made in cash, both the number and the amount of physical transactions spent fell, by 6.7 per cent and 9.7 per cent respectively.  I personally rarely pay for things with cash and despite the seduction of Usain Bolt’s adverts, I haven’t yet used Visa’s contactless payment systems as I find it easier to track my spending and budget by monitoring using online banking as well as the fact that I find the size and weight of coins extremely frustrating to cart around.

I am still relatively conservative generally,  just using either credit or debit card, but the report has noted that there has been substantial growth in the use of ‘alternative’ methods of payment, which have doubled compared to 2011.  In total, these non-cash, non-card payments account for £3.3 billion of sales turnover (compared to £1.5 billion in 2011) through 499 million transactions, around 5 per cent of all payments made during the year.

As Helen Dickinson, Director General of the British Retail Consortium, accurately commented: “New ways to pay and new ways to shop are shaping the retail landscape like never before.”  This shift in http://www.retailgazette.co.uk/articles/42402-cash-use-drops-10-amid-new-ways-to-payconsumer behaviour is something retailers need to be fully prepared for.

Over the past couple of years, overseas investors have been flocking to the Central London office market, drawn by its transparency, liquidity and scale, as well as the prospects for the capital’s economy. So much, in fact, that 2012 saw the highest volumes since the onset of the financial crisis, with international buyers accounting for 74% of activity. Unsurprisingly, the supply of the prime stock many are looking for is beginning to dry up, and they are beginning to look at secondary stock with angles, as well as joint ventures with local players.

Meanwhile, the letting and development markets – which ultimately supply investors with the product they need – have been quiet. Perhaps not as quiet as many might have expected a few years ago, but certainly below long-term averages. Activity will certainly have to pick up if the investors are to remain confident about London – and if they are to continue to be supplied with opportunities.

Luckily, there are now growing signs that this is beginning to happen. Set aside the fact that the first quarter produced the highest take up for two years, as the total was skewed by the 863,000 sq ft presale to Google at King’s Cross. The important trends lie in the detail.

The amount of space under offer as at the end of the first quarter stood at 1.9m sq ft, the highest since 2011. Active underlying demand – with the vast Google deal stripped out of the picture – rose by 13.6% over the period. Meanwhile, our leasing teams report mounting interest from potential occupiers, leading to a sense that negotiations are becoming more pointed. It is no surprise that prime City and West End rents have edged up by £2-£2.50 over the past six months to stand at £97.50 psf and £57.00 psf respectively.

The key question is whether all this interest will translate into activity. Given the nervousness surrounding global economic prospects, and the continued turbulence in the Eurozone, companies are wary of making significant commitments. Deals are taking far longer to close than was typical before 2008.

Given the growing signs that the wider UK economy is improving, it seems likely that decision makers will hold their nerve and begin to take the space that they surely need. The second half of 2013 could see much stronger volumes in the London office market than we have seen for some time.

For your further interest check out our recent Central London office market report

Department store House of Fraser (HOF) has announced that like-for-like sales increased at record levels at 3.3 per cent to £1.2 billion over the last full year as the group has achieved growth across all categories, according to figures released last week.

In the 52 weeks ended January 26th 2013, adjusted EBITDA rose 4.3 per cent to £61.1 million while the retailer accrued its largest ever gross profit, up £4.7 million to £403.8 million

This update comes during further news of investment in its multichannel operations which have seen the retailer vastly improve its website, create a broader variety of products and a much more mature selection of delivery possibilities. This has assisted sales online to be boosted 53 per cent and accounted for 10.9 per cent of total sales last year.

In-store refurbishment has continued over the year, with focus notably at HOF’s Oxford Street flagship on retail experience, something this blog has talked around many times. The retailer themselves have noted that this investment in-stores has been reflected in positive performances.

HOF’s debts are down £6.2 million to £157.2 million and there seems to be interest from a number of buyers, it is said that HOF held talks last year with Mike Ashley’s Sports Direct firm and it has been widely reported that Qatari investors have held talks about making a bid for department store chain.

In stark contrast, Marks & Spencer announced last week that it had underwent a 4.1 per cent fall in like-fore like sales of general merchandise in the year to March 30 as it lost sales in the ever important womenswear sub-market. The UK’s chief clothing chain posted a 5.8 per cent fall in underlying pre-tax profit to £665.2m.

Further news this week from Marks & Spencer which has put a halt on all new clothing stores in the UK. With its lowest pre-tax profit in eight years at £564m, down from £658m a year ago, they announced that they would add no extra space for general merchandise in the UK from 2016 and would instead focus on its digital operations. M&S, which has 766 stores in the UK, believes it will have reached saturation in the country by 2016 as more customers shop online.

John Lewis has enjoyed success in the last week also as weather conditions meant that they saw 8.8 per cent increase in sales last week, with its Glasgow store among the best performers.

While its Tamworth store in Staffordshire saw the biggest increase – of 16.5 per cent – John Lewis said its Glasgow branch “was also on fine form, up 15.1 per cent”. There was also success in other Scottish stores as; takings in Edinburgh grew 4.7 per cent, while its Aberdeen store gained 0.5 per cent.

After Fitch Ratings upgraded Turkey to investment grade in November 2012, Turkey earned its second and third investment-grade credit ratings in May with an upgrade to BAA3 and BBB by Moody’s Investors Service  and Japan Credit Rating Agency (JCR)  respectively.  Currently, the country secured three investment-grade credit ratings, and it is expected that this will be further strengthened by possible upgrading by Standard & Poor’s.

While Moody’s announced that Turkey’s improving economy and public finances warranted the upgrade, JCR announced “Turkey has successfully weathered challenges of highly adverse international economic environment from the Lehman Shock through the European sovereign debt crisis. Increased net export and lowered unemployment rate in 2012 suggest strength of its growth potential, despite dropped GDP growth rate itself. The level of national income has always been far greater than those of Asian emerging economies”

With the Moody’s upgrade, Turkey has joined a diverse range of economies at the bottom of the investment-grade pool, including Azerbaijan, Uruguay, Hungary and Spain. 

The credit rating upgrades are expected to boost an already robust local real estate industry, particularly in regards to foreign investment. Upgrades will encourage more businesses to expand and relocate to Turkey. This will have a domino effect in the market. As more international businesses open new offices in Turkey, it also will bring in more foreign employees.

It has been seen that international investors are quite active in the Turkish market, willing to benefit from the significant young population, proximity to untapped markets and positive economic prospects. It is expected that these upgrades will help the enlargement of the international investor-pool.

Germany will provide the best total returns for logistics assets this year according to our latest poll that asked “Which country will offer investors the best prospect for total returns in the logistics sector this year?” Almost 40% expect this to be the case. This clearly reflects the strong fundamentals in the market and German economic growth projections, with expected GDP growth in 2013 the strongest of the core European logistics investment markets.

15% of respondents expect Poland to offer the best total returns this year. This confirms the ongoing strong interest in this market as investors are seeking to find opportunities outside the three most traded markets (the UK, Germany and France). Indeed, Poland now forms part of the wider core European logistics investment markets group in the perception of investors.

If you are interested in more insight into the latest logistics real estate research, please check our Logistics & Industrial micro-site. While you are there, please take also part in our new poll – In five years’ time will Russia be the leading European logistics market in terms of annual take-up volumes?

Link to Logistics & Industrial micro-site

Link to new poll

Four days and four nights in Las Vegas for our JLL Global Retail Agency Board at ICSC RECon and I have made four observations.

First, the US is an amazingly dynamic and innovative retail market, with a vast, untapped supply of retail and leisure brands and formats that have yet to explore new territories.

Second, global is the key theme that dominates recent conferences I have attended. Against the backdrop of mixed economic growth prospects and therefore both risk and opportunity, the globalisation of retail appears to have accelerated.

Third, our JLL global network of retail expertise and its potential to advise global retailers is what it is all about. ICSC RECon Vegas has assisted in building stronger internal and client relationships and in creating new opportunities.

Finally, Las Vegas has exceeded expectations and has provided everything we needed to get us through the four days. It is truly unique, but it’s now time to head home.

After a substantial amount of speculation, supermarket Morrisons will finally have an online grocery retail presence, after launching its new agreement with Ocado this week. The deal has, however, not gone unnoticed by competing supermarket Waitrose, who also have an arrangement with the delivery firm.

The introduction of e-retailing for Morrisons at the end of this year will use Ocado’s newly opened circulation centre just off the M42 near Tamworth in the Midlands for deliveries via a Morrisons-liveried fleet. From a customer perspective, the operations will be totally separate from Ocado’s core business. I personally do not do my grocery shopping online. This, in general is because I am buying only for myself and despite the higher costs and lack of choice the convenience of popping into my local Tesco Extra / Co-Op is the biggest pull for me.

On the other hand, I can see how others might benefit in doing a big weekly/monthly family shop online or a one-off Christmas shop. My parents do not currently shop online but Ocado and Morrisons’ have agreed a 25 year contract and I would not be surprised that during this time period some of their custom could be brought online if the process was made simpler and easier than shopping locally. This 25-year arrangement, includes Morrisons remunerating Ocado up to £170m so that they can procure the site and equipment. Morrisons are obligated to produce sales of at least £100m by year three and £200m by year five. Otherwise, Morrisons will squander its exclusivity protection.

Morrisons chief executive Dalton Philips has also spoken this week with confidence that the grocer can outpace the online food market through its partnership with Ocado. Philips communicated  to Retail Week that the amalgamation of Morrisons’ credentials in fresh food and Ocado’s technology capabilities would enable Morrisons to rapidly win market share.

Unsurprisingly, Waitrose are rightfully worried about the deal and have ordered its lawyers to inspect the deal to see if there has been a breach of contract with the John Lewis Partnership-owned grocer. Conversely, Ocado’s chief executive Tim Steiner has maintained that their contract with Morrisons will have no bearing on the contractual relationship with Waitrose.

I, in fact, tend to agree with Steiner’s claims that the money from the deal will drive customers to Waitrose as Ocado’s overall development will be hastened in the long run. However, it won’t be for a while before I start to regularly use either of their online offerings. This seems to be how the online market is going in terms of per cent of the overall market. According to Columino although the online grocery market will grow nearly 70% from 2012 to 2017, this is from a relatively small base. The proportion of online grocery shopping will only increase from 4.66% to 6.47%. The growth in online retail sales will therefore drive significant new demand for logistics real estate, as talked about in the Jones Lang LaSalle report, but in my view further expansion of the M Local and Little Waitrose store formats is almost as focus important for both retailers.

What do London and Paris have in common with Cape Town and Johannesburg?

Surely not the weather…

Rather, Jones Lang LaSalle’s research has identified these cities as the most transparent and most actively traded in their respective continents.

While Europe’s established real estate markets and densely populated cities will continue to be the focus of investors’ interest for years to come, attention is starting to be drawn to the opportunities offered by Africa.  Our recent research identifies 20 African cities that will make their mark on the commercial real estate sector over the next decade.  Rapid urbanisation, youthful populations and solid GDP growth present investors, corporates and retailers with major opportunities for development and expansion.

The 20 cities to watch are:

• Angola: Luanda
• Egypt: Alexandria, Cairo
• Ethiopia: Addis Ababa
• Ghana: Accra
• Kenya: Mombasa, Nairobi
• Morocco: Casablanca, Marrakech, Rabat, Tangiers
• Mozambique: Maputo
• Nigeria: Abuja, Lagos
• South Africa: Cape Town, Durban, Johannesburg
• Tanzania: Dar es Salaam
• Tunisia: Tunis
• Zambia: Lusaka

Surprised? You shouldn’t be – but you’re not alone.  Africa is often perceived as a continent plagued by conflict and corruption.  Admittedly poor real estate transparency continues to constrain many of these cities, but operating environments are selectively improving and there are potentially huge pay-offs for  those cities that can strengthen regulatory control and the fairness of transaction processes. 

The 20 cities collectively represent an urban population of 70 million people and 11 of the cities are located in just four countries.  A closer look at these countries reveals that corporates and investors are already seizing opportunities, which is paving the way for others to follow suit:

• Egypt: Cairo, the most populous city in Africa, and a key target for developers, despite political and economic uncertainties
• Morocco: Casablanca, the largest city in the Maghreb region and an emerging outsourcing hub
• Nigeria: Lagos, the commercial hub of Africa’s second-largest economy and a city witnessing rapid GDP growth at over 7 percent
• South Africa: The continent’s only transparent real estate market

Interested in learning more? Please visit Jones Lang LaSalle’s Research resources:

• 2012 Global Real Estate Transparency Index
• Regional focus on:
  • Sub-Sahara Africa
  • Middle East and North Africa

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