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UK Retail – British Land signs deal with BT to provide Wi-Fi at its Shopping Centres

Monday, May 13th, 2013

Posted by: Jonathan Bayfield
Retail Research & Consulting
Jones Lang LaSalle EMEA Research

One of the big stories in the UK retail sector this week is that customers at British Land’s shopping centres will be able to enjoy free Wi-Fi later this year. As many of you know, for me, this is really great news!

British Land’s full shopping centre portfolio will benefit from the deal with BT Wi-Fi. Additionally to providing free Wi-Fi to its shopping centre customers, British Land has come to an arrangement to work with BT to try and deliver a strong Wi-Fi offering at a number of its open air shopping parks.

The move follows news from earlier in the year that intu, the rebranded Capital Shopping Centres, is installing Wi-Fi across its shopping centres as part of a wide-ranging digital improvement. The Trafford Centre is the first in the portfolio to benefit from a new fibre optic network and the provision of high quality free Wi-Fi throughout the mall.

It seems that Wi-Fi in UK shopping centres is slowly becoming the norm. It wasn’t too long ago that I visited Westfield Stratford City after work to pick up some ‘summer’ items for a family trip to Southern Africa. My flatmates and I did a bit of shopping, then went for a Nando’s; while waiting in the queue I was able to log on to the Westfield Wi-Fi and find out whether retailers had launched their ‘summer’ lines or not, and see what was in the market before I went in to try on my favoured items.

Intu’s research signals that almost half of UK internet users will, like me, make use of the internet at some point during the shopping process and that the conventional borders of online and offline shopping experiences are becoming more distorted. As I have discussed in this blog before, the introduction of new technology by both retailers and landlords is crucial to improving the customer experience, and increasing the connectivity between the landlords, retailers and consumers. British Land, Westfield and Intu are at the forefront of this evolution, as they seek to provide customers with a harmonious, multi-channel experience in their centres.

 

Please click on this link if you would like to read this week’s retail and leisure news.

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Posted in Retail 2020, Shopping centres, Trends, UK | No Comments »

City breaks that break the bank

Friday, November 30th, 2012

Posted by: Colin Burnet
Retail Research & Consulting
EMEA Retail Research and Consulting

Wondering where to go on your city break next year? If it’s shopping you’re after, and the buzz and glamour of the big, international brands in particular, then Jones Lang LaSalle’s new report, Destination Europe 2013, is a must read.

The report unveils our new cross-border retailer index, which analyses the expansion and presence of 250 international retailers across 57 key European city retail markets. London comes out as the most attractive city, with Paris, Moscow, Milan and Madrid, all mature retail markets, comprising the remainder of the top five most attractive cities.
London is a springboard for many retailers who want to expand internationally. Several US and now Chinese retailers have started their European journey over the past few months in this way. More will follow, driven in part by Westfield’s successfully launched new shopping centres, continued demand for space in Bond Street, Oxford Street, Regent Street and Covent Garden, but also sustained market opportunity, tourism levels post the Olympics, political stability and a transparent real estate market.

However, with subdued economic growth in Western and Southern Europe, retailers are also starting simultaneously to look further east. Emerging growth markets provide attractive expansion opportunities. Rental levels are generally lower than in more mature markets and retail sales growth prospects are clearly stronger. St Petersburg (8th), Prague (9th), Istanbul (11th), Warsaw (19th=) and Kiev (23rd=) all therefore perform strongly in the index within this context. Central and Eastern Europe has more markets in the top 30 retail locations than Southern Europe. For mature retailers established in core European markets, Eastern Europe provides both growth opportunities and diversification.

So, plenty of tasty options there for the city breakers amongst you – just remember to take your credit card, and leave plenty of room in your suitcase…

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Global Retail Banking – Prepare today or fail tomorrow

Thursday, July 12th, 2012

Posted by: Colin Burnet

Retail Research & Consulting

EMEA Retail Research and Consulting 

We live in a world of economic uncertainty and marketplace volatility. Weakening growth in the developed world, allied with a lack of political leadership is unnerving markets and business leaders alike. As this blog is published, the eurozone crisis rumbles on (or even worsens). Meanwhile, the political stand-off in America is adding to the sense that leading authorities will make a fatal miscalculation.

At the heart of all of this, still, are the banks. Despite the stress tests, there are too many unknowns for any complacency. How many toxic assets still sit on bank balance sheets? How far will slow economic growth or any rises to interest rates, cripple the banks’ loan books? What are the counterparty risks? How quickly could sovereign insolvency and bank illiquidity lead to a meltdown of confidence, a drying up of the interbank market and a second credit crunch? To what extent will regulation force restructuring in the banking industry? Which bank is the next to fail or to need government support?

Meanwhile, the picture in the developing nations and frontier markets could not look more different. By and large we are looking at an increasingly decoupled world where Asia (and other emerging markets like Brazil) are reaching a self-sustaining cycle with far less dependency on the USA and Europe. On-going trade surpluses are raising domestic demand little by little. Economic growth has recovered quicker and to much higher levels than in the developed world. Meanwhile, banks in China, India and beyond, cleansed a lot of their bad debts in the 1990s and capital ratios are in better financial shape than in the West. Despite occasional nervousness about bad loans (e.g. in Chinese local government), and a marginal weakening in economic outlook, the still strong GDP expansion means that, overall, banks in developing countries are looking forward to a decade of profitable growth.

With such macro-economic instability (and divergence), geo-political and balance sheet uncertainty, who’d be a forecaster? And yet it is vital to get our hands around the future. Yes, the exact future is unknowable, but it is possible to anticipate plausible outcomes which can then inform decision making today. Better to predict, assess probabilities and prepare than sit back and become the victim of future changes.

It is in this spirit that Jones Lang LaSalle we have written a report on Retail Banking, 2020. Using desk research, expert interviews and industry round tables across three Continents, we have taken a 360° tour of the horizon. We have looked at political, economic, technological and socio-cultural trends. Bringing this together, we have then analysed the knowns, taken a view on the unknowns and derived a plausible vision of where retail banking is going internationally, and what the knock-on effects will be for real estate markets. Read Global Retail Banking 2020 to find out more

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Retail and The Black-Hole Effect

Wednesday, April 4th, 2012

Posted by: Colin Burnet

Retail Research & Consulting

EMEA Retail Research and Consulting

What was the average size of the Welsh backline in the Six Nations? According to various estimates, somewhere between the size of my shed and my house. My initial reaction was that I’m glad my playing days are long gone. But it also seems to be indicative of a wider trend, towards size, power, scale in everything.
In retail property, the trend is undeniable. We term it  ‘black hole retailing,’ whereby prime, dominant centres suck in so much of the spending in their regional catchments, that they leave increasingly little for former prime, secondary and tertiary locations. To illustrate, Westfield announced recently that it’s two London flagship malls will sell an astonishing £2bn worth of merchandise this year. Westfield also announced that it is selling three of its minor UK shopping centres to free up cash to fund a share buyback and to ‘expand its global reach in primary markets.’
Across Europe, major players are selling either non-core or secondary stock to focus on their existing larger centres, or to buy new absolute prime stock or to fund their prime development pipeline. Notably;
• Unibail-Rodamco is selling some of its smaller centres in a bid to focus on its larger centres
• Klépierre plans to sell €1 billion of assets by the end of 2013 to finance its prime development programme (no doubt a factor in Simon Property Group’s recent weighty investment in Klepierre)
• Corio is selling €670 million worth of properties to help finance a €2.5 billion pipeline of shopping-centre projects
• Hammerson is selling its office stock to concentrate on its major retail assets
• British Land will invest primarily in locally dominant retail assets amid increased polarisation between prime and secondary in the sector.
What this confirms is that the major developers, investors and retailers alike appear to be backing the ‘size is everything’ mantra. We explore this, and other hot topics, in more detail in our Retail 2020 series. It’s gratifying to see that the Welsh rugby team, for one, have taken the message onboard!

Posted in Retail 2020, Trends, UK | No Comments »

Structural change playing out, but still some way to go

Monday, March 26th, 2012

Posted by: James Brown

EMEA Retail Research and Consulting

Peter Lowry, CEO of Westfield and Sir Philip Green of Arcadia shared the platform this morning for the opening of the Bank of America Merrill Lynch Real Estate Conference 2012. This much anticipated and attended session, in my mind, set the tone for another day in a retail market that is facing significant structural change.

Westfield’s success is in place making and the ability to provide a differentiated mixed use offer to compete in an increasingly competitive retail market; this was clearly laid out by Peter. Sir Philip was clear that as a retailer they would be investing more in fewer, better stores (Westfield Stratford being an example). Both sides played to the tune of continued polarisation.

The retailer session later in the morning touched upon portfolio optimisation and ‘cross border’ as opposed to ‘domestic’ expansion strategies and saw unanimous agreement from panellists (including our very own pan Euro retail specialist, James Dolphin) that retailer requirements have fundamentally changed. We heard about healthy demand for the ‘right space’ in the ‘right place’ but also about the tumble weed that is likely to enter some weaker secondary locations across Europe. 

This discussion continues on from our Retail 2020 debate (www.retail2020.com) and will continue to roll for some time. Rest assured, the retail and retail property market is changing at a rate we are not accustomed to, and imminent lease expiries will be the catalyst for much change. Until some of these leases expire however, it is simply a waiting game.

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The German Shopping Center Investment Market Outlook 2012

Monday, March 5th, 2012

Post by：Anke Haverkamp

Team Leader Shopping Center Investment Germany

In 2011 the commercial property investment market in Germany was clearly dominated by the retail sector, which accounted for around 45% of the total transaction volume of €23.5 billion. This positive trend is also evident with shopping centres. The transaction volume in 2011 grew by around 54% to €4.8 billion, meaning that shopping centre transactions accounted for around 45% of all retail property transactions. What are the main trends on the shopping centre investment market in 2012? 

Stable prices but little demand in the middle risk segment

Investor demand for Core products will continue to dominate the market situation in 2012. It is more likely that there will be a greater scarcity of high-quality products in 2012 than in the previous year, however. For this reason, we expect to see either stable or slightly higher prices in this segment. At the same time, demand for Core+ properties remains very limited. This is due less to a lack of interest or the non-availability of capital, but more to a prevailing sense of great uncertainty on the market. The majority of investors behave in accordance with the general market sentiment, and demand disproportionately large risk premiums for shopping centres that do not fulfil all aspects of the desired profile. This means that sellers and buyers rarely agree on price. We observe strong demand for value-add properties and opportunistic investments. In contrast to 2006/2007, “opportunistic” no longer means uncritical buying behaviour that is focused only on price. On the contrary, a credible story has become decisive for a successful sale. The expected market development in terms of yield compression is no longer enough on its own. 

Sellers in 2012

In 2012 we expect banks to continue the process already partially started in 2011 of cleaning up their balance sheets. Core properties are more likely to be sold off in individual transactions. On the other hand, it often makes more sense to sell value-add or opportunistic properties as part of a portfolio in order to increase the investment volume and optimise both time and resources. Furthermore project developers, but also asset managers in particular, will typically continue to exploit the good market environment for sales. It is not yet clear to what extent the German open funds will emerge as sellers. We will certainly see a sale or two on the market based on the fact that open-ended funds are increasingly focusing on active asset management. May 2012 will represent a decisive point in time, however: four of the currently closed funds will then have to decide whether to reopen or liquidate.

Trends among purchasers

The capital structure of large property transactions, which regularly take place in the shopping centre category as well, is becoming increasingly diverse with the development of more complex forms. Equity contributions and alternative financing channels are gaining in importance in this area.

Local expertise

Investors have recognised that shopping centres are a very complex product. Against this background, we are increasingly observing that international capital is joining forces with local retail specialists. This is happening in two ways: first, investors identify a suitable product and bring in an established market player early on during the examination phase. This player later takes on the asset management and frequently buys a minority stake in the investment; second, investors participate in project developments that have already reached a certain stage (e.g. pre-lettings, building permits etc.). For players such as ECE, this approach is not new. What is new is that the circle of the local partners has expanded, as have the number and origin of the investors that are searching specifically for these investments. This type of cooperation was first evident on a larger scale at the beginning of 2010, and has continued steadily since then. Local players with very good development know-how will particularly profit from this evolution. In this way they will be able to cover funding shortfalls with the required additional equity.

Shareholdings/partnerships

A further trend that is becoming increasingly apparent is the flow of capital from global and European sources that want to invest directly in property, rather than indirectly as in the past, and enter into long-term partnerships. As a rule, they aim to establish joint ventures with equal shares and seek partners that have an equally long-term view. This development opens up interesting possibilities for property owners. Property companies are able to sustain their asset management role and release capital at the same time. A positive side effect is that property investments are also increasingly becoming liquid in Germany, as long as the underlying joint venture agreements fulfil the demands of international and institutional investors. The fact that most sales of investments are not subject to land transfer tax also makes this investment structure very attractive commercially. This has particularly been the case since the land transfer tax was increased in several federal states.

All in all we expect a further interesting year on the German shopping centre investment market. Apparently, the market conditions remain good and shopping centre transactions will account for the majority of the complete retail investment volume once again.

Link to report:

http://www.joneslanglasalle.de/ResearchLevel1/Shopping%20Center%20Report%20-%202011_EN.pdf

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UK Retail Predictions 2012

Wednesday, January 4th, 2012

Posted by:

James Brown

Head of EMEA Retail Research and Consulting

Guy Grainger Jones Lang LaSalle

Guy Grainger

Head of Retail, UK

 

Summary:

  • Clicks’ drive retail growth at expense of ‘bricks’– for some time to come
  • Imminent lease expiries – a catalyst for swift change
  • ‘Protecting rental values’ becomes the new ‘rental growth’
  • Valuation adjustments – coming soon
  • Relative winners still emerging

‘Clicks’ drive retail growth at expense of ‘bricks’
Online retail to strengthen during 2012…
Online retailing has been the clear winner throughout 2010 and 2011, against a backdrop of a weak economy, stubborn inflation, unemployment, falls in real retail sales, and general uncertainty. The benefit of a wholly integrated online offer as part of an optimum retail model is clear, the effects of its impact on physical space will begin to hit home during 2012.

Occupational requirements fundamentally change …
Occupier requirements have fundamentally changed. By targeting growth through online sales and through international expansion, most mature, domestic non food retailers will be net reducers of space in the UK. For new expanding retailers it is simply a case of stores in fewer locations.

Too much space….
The result is a significant over supply of space in UK towns outside the top 50.

Imminent lease expiries – a catalyst for swift change…
50% of high street and shopping centre leases to expire by 2015…..
In shopping centres and on the high street we are coming to the end of the 80’s 25 year leases, the 90’s 10 year leases and sub 10 year leases of the last decade. According to our latest research, up to 25% of existing high street and shopping centre leases are due to expire by 2013 or 50% by 2015 (versus approximately 5% and 15% for retail parks by 2013 and 2015 respectively).
With a reduction in demand for physical retail space relative to 10 years ago, and retail requirements gravitating towards fewer retail locations, polarisation has been playing out, albeit relatively slowly until now. We have not yet seen the true effect of this shift in demand on our retail landscape, but the next 24 months are likely to see a swift and dramatic playing out of this polarisation as lease contracts expire.

Retailers to have more leverage on rent negotiations going forward…
These lease events will trigger a) rent reductions and b) increases in vacancy rates, as retailers walk away from sub-optimal stores. Long leases have protected rents in previous downturns, as retailershave had little chance to negotiate if more than 3-4 years from lease expiry. With shorter 5 year lease lengths and break clauses becoming the norm, upward only rent reviews could become the exception to the rule.

‘Protecting rental values’ becomes the new ‘rental growth’
Pockets of rental growth forecast for 2012 …
Average retail rents are still below peak levels. Demand is weak outside prime and is unlikely to return until fundamentals recover. In some instances, due to changing occupier requirements, retailer demand may simply not return.
As retailers look for good value rents, we will still see some growth on retail parks offering space at £15- £40 per sq. ft. often as a result of regeneration of DIY stores for value, food and non food retailers.
Restaurant demand is similarly strong, both in and out of town, as the distinction between retail and leisure becomes blurred.
Regional high streets and secondary shopping centres are most susceptible to significant rental income erosion, although London will continue to be a robust market as demand simply outweighs supply.

Business rates – a significant headwind in non prime…
Whilst new deals will reflect market value and will have to adjust downwards (or should), business rates remain the elephant in the room. Set at 2008 valuations, the 2010 rating revaluation is outdated and needs attention prior to the next VOA revaluation date of 2015. Based upon average rental declines from 2008 to end 2011, a 45% business rate contribution calculated at 2008 valuation now equate to over 50% of rent today. In harder hit markets, business rates will equate to 90% to 100% of adjusted market rents in 2012.
Market forces will come into play on rents – business rates remain a barrier and a significant headwind facing occupier affordability. The only way to address the imbalance without the VOA undertaking a whole re-rating exercise is to reduce business rate contributions from 45% (of 2008 rateable values) to a maximum of 30%.

Development to return, but not as we know it…
Whilst most commentary has focussed on the lack of town centre regeneration we are witnessing significant plans to redevelop older stock in the out of town market. Many original 25 year leases from the late 80’s/ early 90’s are coming to an end, which is coinciding with a change in planning landscape. Localism gives Local Authorities greater autonomy in determining how they generate new inward investment and income which is being reflected in a more commercial approach to granting planning permissions for retail and leisure development, sometimes to the detriment of the traditional retail centre.

Valuation adjustments – coming soon…
All of the above points to downward rental revisions for secondary locations during 2012. The degree of these rental adjustments will obviously depend on strength of the retail offer and occupier demand on a location by location basis.
So, whilst prime stock may be more resilient, secondary stock will see further investment yield decompression, to reflect: deterioration in rental prospects, capital expenditure assumptions, plus a continued absence of readily available bank debt, in order to achieve target IRR’s.

Conclusion – structural change about to play out….
So, quantitative easing and historically low interest rates in particular have provided a cushion for consumers and have softened the landing for UK retail over the recent years since the global economic downturn. Have we hit the bottom? We do not believe the structural and significant change facing aspects of our market have fully played out. 2012 will see more divergence between winners and losers and true values will be realised for secondary property.
Traditional and somewhat predictable retail real estate cycles are a thing of the past. 2012 will be a year of realisation and the first year of positioning for the new order.

Relative winners for 2012: London, prime, leisure, retail parks with development opportunities, convenience retailing.

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Going out! Entertainment – no longer just an anchor tenant..

Friday, April 1st, 2011

Olesya Cherdantseva
Head of Retail and Capital Market Research Russia
Economic and Strategic Research group

Veronika Lezhneva
Senior Analyst, St. Petersburg
Economic and Strategic Research group

The idea of positioning a shopping centre as a place to spend leisure time is gradually becoming popular in Russia. Shopping centres are no longer just places to make purchases, they are destinations. Developers have been looking for ways to make shopping centres an important aspect of social life, where people come for family fun and entertainment; where shopping is part of that experience and not just the reason for it. Of the shopping centres in Moscow and St. Petersburg, 70% and 78% respectively have introduced entertainment programmes. The share of entertainment in shopping centres in terms of leased space is 10% and 15% in Moscow and St. Petersburg respectively.

Multiplex cinema’s occupy more than half of the entertainment areas in SCs in Moscow and Russia. Half of the quality SCs both in Moscow and St. Petersburg have cinemas, but we are still far beyond European market with its 80% of cinema penetration.

Other forms of entertainment include bowling and billiard centres, shooting galleries, recreation areas and demonstration halls, playgrounds for children and entertainment parks. Bowling and billiard operators are desired tenants in St. Petersburg market where they are present in 40% of retail schemes, whereas in Moscow and Europe their presence is much lower, at 10% and 13% respectively. Childrens entertainment operators are more developed in the capital of Russia, whereas St. Petersburg suffers from the lack of professional players.

The entertainment part in a SC tenant mix is now a necessity for any successful shopping centre in Russia. But the attractions are becoming more alike, and so the need for something new and unique is more apparent. Because of technical characteristics and the threat of lower attractiveness with time, the unique attractions have not been popular until recently. The situation is changing though – SCs in Moscow and in regional cities will be more interested to attract unique and individual entertainment operators in the near future and help drive footfall.

Read more about retail entertainment in Russia in our latest report: http://www.joneslanglasalle.ru/ResearchLevel1/JLL_Russia_Going-out-EN_March_2011.pdf

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The year ahead in UK Retail

Tuesday, February 8th, 2011

Guy Grainger Jones Lang LaSallePosted by Guy Grainger
Head of Retail UK
Jones Lang LaSalle

Another year over and one that drew to a close with the retail industry facing a dampening of sentiment on the consumer side (austerity measures, job security, the VAT rise etc…), and adverse weather disrupting the all important Christmas trading period.

You’ll know by now that many retailers prospered and it was encouraging not to see widespread discounting until the final week before Christmas. A drop in retail sales in December of -0.3% year on year was not unexpected given the heavy snow and certainly much better than some of the doom mongers were predicting.

For retailers though, concerns are not about Christmas 2010 but the impact of austerity measures and inflation on performance in 2011. So, what’s in store? Here are some things to watch….

- It hardly needs to be said, but keep an eye on inflation. Along with job security, a jump in interest rates will have the greatest negative impact on consumer sentiment and expenditure this year.

- As belts tighten, consumers will seek value for money, good service or real convenience. Retailers will have to be on their game to generate growth in profits.

- Year on year growth has been up across the board for the large food retailers. These retail giants will be responsible for the most expansion in 2011 and they could also be the catalyst for some major town centre regeneration.

- By 2020 online sales could comprise up to 20% of total expenditure. Those retailers with a truly multi-channel business and unique product will benefit at the expense of multi-branded retailers.

- Several sectors will see consolidation either due to market influences or opportunities for retailers to drive economies to scale. We anticipate this most in electrical, home and value sectors.

So, we’re set to see some changes as the market continues to bed down and react to some of the challenges emerging from a variety of angles. There is no doubt though that the best will continue to evolve, continue to surprise and for many it will be a year of great opportunity!

Posted in Online Retailing, UK | No Comments »

3 key questions for any retail real estate owners and investors

Monday, February 7th, 2011

Posted by: James Brown
Head of EMEA Retail Research
Jones Lang LaSalle EMEA Research

We posed three key questions to a group of fund managers, marketers and asset managers from a selection of leading retail real estate owners and investors. The answers were not all rosy – but what’s clear is that with challenges will come opportunities.

1)      What will be the biggest challenge you face over the next decade?

The biggest challenge is how to cope with and embrace the continued rise of the internet – more specifically the mobile internet which is the next great game changer. Soon, consumers will be red scanning barcodes in-store to look up comparative prices on-line, and doing so on a mass scale. They will be using apps to communicate the good and bad aspects of their retail experience. The internet is still regarded as a direct competitor to physical stores – but without doubt it will bring benefits and opportunities aswell. Retailers and shopping centres need to respond to provide a shopping experience that outweighs the convenience and cost reductions that the internet offers – and this will create fun, exciting retail destinations that should be seen as a huge opportunity for active asset management.

2)      How far do you think tenant mix will change in your Shopping Centres?

If the number of people choosing to purchase goods online continues to increase, then it is possible retailers will not be able to sustain large store portfolios, which will demand a uniform rethink of what to do with vacant space. Here are some options:

•             Leave it vacant (for exhibitions, pop-up stores etc)

•             Distribution (assembly, pick up or shipping of customer purchase from in-store on online)

•             Temporary let – but not good for long term future

•             Let to any retailer but with significant reduction on market value

Secondly, with more International retailers entering our market than ever before tenant mix will undoubtedly alter in our shopping centres. This may even support the necessary change to greater ‘experience’ – for instance US stores often run with the concept that customer interaction is key, where many British stores still tend to leave customers to it.

3)      How far do you think the service you offer will change in your Shopping Centres?

More services in terms of restaurants, cafes, cinema and other entertainment facilities will be needed in the future. This need to change however contradicts with the commercial reality of a fully let centre – change may therefore be relatively ‘slow’.

Changing demographics will play a big part in service provision as well. Soon, Shopping Centre managers and retailers will not be able to tick all the boxes to say that basic needs are being met – the needs are changing and getting greater. Car parks are not easy to use, there are often too few toilet facilities of a poor standard and the Shopping Centre themselves are not easy to navigate. For the older shopper – a group which is growing in numbers – this will become ever more unacceptable.

Posted in By Country, Online Retailing, Retail 2020, Social Media, Trends, UK | No Comments »

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