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

Monday, May 13th, 2013

jonathan bayfieldPosted 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 »

What is retail’s future?

Monday, April 22nd, 2013

emea-retailPosted by: Jonathan Bayfield
Retail Research & Consulting
Jones Lang LaSalle EMEA Research

 

Three months after joining Jones Lang LaSalle as a graduate in the Retail Research team – I thought I should have a look into where I think the current retail market is and peer into its future.

The shopping centre or high street of yesterday is a thing of the past. Customers, myself very much included, are searching for a multi-channel combination of accessibility and, more importantly, experience. This new type of consumer is demanding more from the retailer than ever before. I want to have freedom to shop when, how and wherever I want. Whenever I look to buy in store, I will have looked online and vice versa. In fact, often I’ll be browsing my phone, sending my friend’s pictures of what I am trying on and they’ll be sending me information about what else is out there. Radical structural change is taking shape, which the real estate industry must adapt to. This video of London’s new Burberry store showcases the store of the future, the merger of the high street with e-commerce.

‘Experience’ focused stores, which marry elements  of e-commerce (such as Burberry’s) in super-prime locations, such as London’s Regent Street, are the growing trend for international retailers, as our team has detailed in the recent Destination Europe 2013 report.

Retail’s future is clearly going to have an ever increasing engagement with the internet. As a big fan of my iPhone, I am not surprised to note in this BCSC report, that 25% of total UK sales are expected to be driven by m-commerce (mobile) by 2020.

As shoppers increasingly become visitors of retail space, the shop experience becomes more crucial for brand engagement as new consumers can shop on the move anytime and anywhere. London’s Niketown,  in the prime location of Oxford Circus, has been a leader of this engagement for a number of years. Much to my family’s frustration, I would love to kick a football around on day trips to London and watch the latest extended edition adverts in store, never buying anything there and then.

The latest type of commerce predicted to start making more and more powerful waves in the sector, is s-commerce. This is essentially the effective use of (online) social networks to promote and sell good. Retail Specialists, Conlumino, have analysed s-commerce’s likely growth and claim that over the next five years, the value in the UK will rise from £1.6 billion today to around £3.3 billion. Retailers using sites such as Facebook, Four Square and Twitter to drive sales and footfall to stores are likely to be ahead of the market, for a consumer like me at least.

Posted in France, Germany, Retail 2020, UK | No Comments »

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

Posted in Retail 2020, Trends | No Comments »

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.

Posted in Retail 2020, Trends | No Comments »

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.

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

Opportunity in Italy

Tuesday, November 15th, 2011

Davide_DalmiglioPosted by: Davide Dalmiglio
Director – Retail Capital Markets Milan

Italian expectations for Mapic are different compared to usual given the whole country is at the centre of attention of the European Community.

On one hand the reputation Italy has at the moment is not ideal. As Italian operators we are ready to get negative reactions from international markets and players.

On the other hand the positive economic fundamentals our retail schemes have had during 2011 in terms of performances, but more important the outcomes of the political situation likely to give a new government can give a new energy and more credibility to our market stopping the booming of the spreads of our bonds and the bleeding of stock indexes.

Mr. Mario Monti the proposed prime minister (formerly officer of the European committee) can grant a different reputation and reliability to Italy compared to our former prime minister.

The challenges are tough but now Italy has all the ingredients to solve the huge problems provided by high public debt and escape default (which is very far from reality).

Mapic will have an interesting participation of italian players, circa 10% of the total attendees, and more importantly Italy will be host of honour for 2011.

Despite our slowdown in the development process across the country and the drop of retail transactions we, as Jones Lang LaSalle continue to promote our services and our products trying to show the great value we provide to clients especially in challenging circumstances and with declining market climate.

We are aware that now the italian retail market in Italy cannot be considered “core” any longer – but we are confident in our ability to adapt and provide insight and opportunities to our clients in the new and changing environment.

Posted in MAPIC 2011, Retail 2020 | No Comments »

A view from the East

Thursday, May 5th, 2011

Yulia Gorlova
Senior Consultant
Moscow

I embarked on a career in retail consulting in Moscow as I was told that I would be spending lots of time shopping. Joking apart I found that even on vacation instead of aimlessly shopping and taking in the sites I find myself comparing brands and store sizes on the high street and counting fast-food operators in the food courts. This was no different on my recent trip to London.

While making my way through the bank holiday crowds on Oxford Street, I was wondering when all these mid- and mass-market brands and department stores will hit the Moscow high streets?

The Russian market is perceived by retailers as attractive but plagued with a number of risk factors. This view is unfounded as Russia is one of the most fast-recovering economies and the retail market activity is driven by increasing purchasing power and very low debt and saving levels. The level of multichannel sales that have been recently jeopardizing the high street store sales in countries like the UK is an issue that is yet to emerge in Russia. Many large retailers such as Inditex Group, H&M and  Topshop  benefit from the relatively unsaturated Russian market and thus are achieving high turnovers.  2010 saw newcomers such as All Saints Spitalfields, Kurt Geiger and Reiss, but international brands such as these are still few and far between outside Moscow and St. Petersburg.

Perhaps the most obvious reasons for the current lack lustre interest is the deficit of quality retail space supply, lack of professional and reliable franchise partners for those who prefer this type of market entry vehicle. Also when looking in to feasibility income disparity between Muscovites and the rest of the country’s population makes sales estimates problematic.

The hot spots for international brands such as Hollister, Apple, Forever21, American Apparel etc are currently Spain, Germany, Nordics, Turkey. The reasons behind their active expansion strategy vary on a country by country basis. Potentially in Spain they are attracted by relatively low rents, and in Germany or Sweden they are taking advantage of the stable consumer demand but also sufficient supply of prime retail space to accommodate these retailers. Wherever they locate they are targeting lucrative young fashion spend and seeking locations that will compliment their brand and the Russian markets will need to prove this in abundance before establishing itself as the next hot spot.

However, the trends for Russia are positive, and it will just take time for more global retailers to realize it’s potential and formulate the right expansion strategy in Russia and maybe CIS.

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

How green is a green supermarket?

Friday, April 1st, 2011

Ondrej VlK
Head of Research
Czech Republic & Slovakia

So Tesco decided to go green in the Czech Republic. Their pilot project opened on February 10th in the small town of Jaromer. On first look, the result is pretty impressive. Instead of the classic prefabricated construction, you get a wooden structure. Furthermore, the owner claims the supermarket will have a zero carbon footprint. It should also be a self sufficient wooden structure, which has its own power and heat generators running on “renewable source”, coleseed oil. The roof has been covered with solar panels. Rainwater is treated and used for cleaning the floors, flushing etc. Simply said anything you could look for in an ordinary “green building” can be found here.

I can leave aside the disputes on the efficiency of burning coleseed oil, but few questions still come to my mind: How will the goods be supplied? Where do these goods actually come from? The answers are fairly simple: convoys of lorries will bring in the goods on daily basis from the centrally managed depots. with a significant proportion originating outside of the country, in many cases even outside of the EU, But this is not uncommon, it’s where supermarkets generate most of their carbon footprint – the transport.

I would not like to be mistaken: the Jaromer ‘green’ Tesco is definitely a positive step, especially in comparison with other similar developments here in the Czech Republic. Let’s only hope that it is only the first step towards the green future and a new benchmark for all other developers. Not only would the carbon footprint of our shopping be slightly smaller, but our eyes would not be spared the ubiquitous grey boxes which have popped-up across the country over the last fifteen years. Which is something we would all welcome.

Posted in CEE, Retail 2020 | No Comments »

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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