Retail space finding its place in post-pandemic world
Despite some serious wobbles during Covid-19 the physical space on high streets and in shopping centres is now fully acknowledged as having incredible value for retailers. But it has to be used more flexibly and creatively than simply for flogging goods as leisure, co-working and food & beverage play increasing roles in the mix.
This was the universal conclusion of the retail property industry executives who gathered for MAPIC, the sector’s annual conference and exhibition, on the south coast of France in Cannes. Among them was Cindy Anderson, managing director of Ingka Centres – that runs shopping centres anchored by Ikea stores, who says: “We’re transforming the centres into meeting places that go beyond shopping. We started listening to people’s needs and that’s our brief. There’s an Ikea of course but they are also community-focused centres based on experiences.”
Thinking beyond the traditional model
This thinking has coincided with the company adopting a business model based on purpose and profit, which involves moving away from traditional KPIs. “We’re looking at the holistic value for the company, community and the planet. We’re bringing the [relevant] indicators together,” she explains.
To help Ingka develop its offer it is partnering with players such as Kerb, which will involve the opening of food courts, and Industrious that specialises in co-working spaces. Stéphane Keulian, F&B concept development leader at Ingka Centres, says the Kerb partnership will see the opening of plant-forward concept Saluhall, having recognised that the food company shares the same purpose as Ingka with its community focus.
With Industrious the tie-up is benefiting from the realisation that co-working spaces work best in retail locations versus traditional office blocks. Jamie Hodari, co-founder & CEO of Industrious, says: “Workplaces in retail malls are among our most successful. It’s the pattern of the way people behave today, they want to mix work with other parts of their life – such as yoga sessions, seeing friends, and shopping on their way home. Retail owners of property know what the feel should be.”
F&B critical piece of the experience
He acknowledges that food is an important part of the mix as it contributes to creating a welcoming atmosphere in the space. This is not lost on the retail sector and developers. Jonathan Doughty, chairman of Whitespace Partners, says: “Retail cannot be the only leg of the stool. Food & beverage and leisure is becoming more of the mix not just in shopping centres but also in transit hubs and offices.”
Although he says the traditional food court has been on the wane there has been an increase in food markets and other shared experiences in shopping environments. Kate Bevin, leasing director at Pradera Lateral – that operates the Trafford Centre, says the long-standing The Orient food court is heading for a more contemporary look that will also see an influx of more Mancunian food brands. “There are opportunities to theme it more contemporary. We’re at the concept stage with some new brands coming in. There will be lots to share in Q1 2024.”
Bevin adds that the F&B offer provides a night time element to the Trafford Centre that makes it more of a destination and boosts dwell times. These non-retail elements that draw in people to shopping centres have dramatically expanded over recent years to include a variety of leisure activities and concepts.
These elements are especially attractive to younger groups. They include competitive socialising concepts such as Flight Club and F1 Arcade. Research from Leisure Development Partners (LDP) found 42% of 18-35-year-olds want leisure venues near their house and 54% would visit a shopping centre more often if they housed such components. As many as 77% of Gen Zs say these amenities would encourage them to visit a mall versus an average of 54% across the whole sample.
Entertainment drives footfall
Yaël Coifman, senior partner at LDP, says: “There is a positive impact from entertainment. If it is in the centre then people will travel further so it extends the catchment area. It can be capital intensive and margins are a challenge, however, it increases footfall to the rest of the shopping centre.”
Christopher Bird, group property director at Merlin Entertainment, agrees with this scenario especially within city centre locations where it is currently focusing its growth: “We’ve seen a gap between big city clusters and regional. Big cities are still growing – such a London, New York, Sydney and Amsterdam – and our new concepts are going into these areas. Under 30,000 sq ft won’t make the same sales per sq ft as a retailer because we have a limited number of tickets we can sell but we should be seen as part of [shopping] developments. The most successful shopping malls in the world have a leisure piece to them.”
Looking to tap into this is Christine Wacker, director of business development at Netflix, who says the plan is to bring the favourite stories from TV franchises to life though live experiences including immersive theatre shows and associated retail concepts. This includes shows such as Queen’s Ball, which is based on Bridgerton, along with Stranger Things and Squid Games, which opens shortly in Los Angeles and is a family-based gaming experience with an aligned food & beverage component.
Going global
The company is currently looking for partners to roll-out these concepts and new experiences it has developed including Netflix House that includes various entertainment elements, which demands repeat visits from customers. This involves global partners as it looks to move into the Asia-Pacific region and the Middle East. It is a similar story at Greggs that is now seeking out parties to help it with its objective of moving beyond the UK.
Nigel Simpson, head of international at Greggs, says: “The time feels right. In the UK we’ve strong growth and a stores pipeline. At some point we will need to go outside the UK to keep the growth going. It now feels right to look overseas.”
Looking beyond its own shores is in the DNA of restaurant group Big Mamma that from its early days looked at international growth and it now operates 24 restaurants in five countries. Tigrane Seydoux, co-founder & CEO of Big Mamma, says: “We saw many people in the industry who said don’t do it. The restaurants are all different – with their price points, operating models and locations.”
As well as expanding further in its existing European countries – including the UK, Italy, Germany and France – the plan is to also move into Dubai in 2024 and then the US, with the latter likely involving a tier two or three city such as Philadelphia rather than New York City. Seydoux says: “New York is complicated and I’m not sure if it’s the best route into the US.”
The US is not on the cards for Rituals but it does intend to expand beyond Europe. Raymond Cloosterman, founder & CEO of Rituals, says the company currently derives 95% of its turnover from Europe but there will be an increased focus on Asia as part of the company’s 10-year “dream” that it put in place two years ago. Although he says there are plans for 500-600 more European stores – to add to its current 1,200 – there is a longer-term strategy. “When there is a slowdown in Europe then we’ll have a new opportunity in Asia…and we have a master franchisee model as you need to have a partner in those countries,” he explains.
Reassessment of physical continues
Physical stores are very important to Rituals and the company has increasingly built out its wellbeing position in health & beauty, which involves adding services and content such as mind spas and regular spas with various treatments and massages in many of its stores. On occasions the company will relocate to larger outlets in order to deliver a fuller offer.
The trend for upsizing stores continues across the retail landscape with many well established brands moving into larger premises – particularly within destination malls. Bevin at Pradera Lateral cites many examples at the Trafford Centre including Marks & Spencer, which has moved from a 90,000 sq ft unit to 130,000 sq ft space, while Next, JD Sports, Superdry, Watches of Switzerland, Calvin Klein and Tommy Hilfiger have also all upsized. “Brands like H&M want key flagships in main locations. In the major markets they need the biggest floor-plates,” she says.
Nik Porter, head of brand account management at Landsec, has experienced the trend across the Landsec portfolio that has been helped by the likes of Debenhams, House of Fraser and Arcadia vacating premises over recent years. “Primark, Uniqlo and Zara are among those upsizing. We’re seeing a continuation of this trend. Shaky retailers have had their space filled by power houses of retail. And they have also moved into adjacent spaces,” he says.
This scaling up is partly down to the need to cater for omni-channel customers who might be using the store for click & collect or for returning goods. At the White Rose shopping centre in Leeds M&S has given 2,000 sq ft over to its click & collect service. “The perception of the value of the physical store has changed. Using them for omni-channel is now mainstream thinking. Retailers are now confident of the [value of] physical space,” says Porter.
Upgrading lesser assets
This super sizing activity is primarily linked to the key destination malls around the UK whereas at the second tier developments it is a less positive story, with challenging trading conditions and vacant units. Ian Sandford, president at Eurofund, has sought to address this by not only investing in the basic infrastructure of these lesser malls but most importantly bringing in a more attractive tenant mix.
Having proven the model in Spain, Portugal and Italy it made the move into the UK 18 months ago with the acquisition of Silverburn shopping centre in Glasgow with its one million sq ft of space. “Some capex went on the look and feel of the centre but most of the money was spent on the tenant mix, with 43 agreements done including signing up Rituals, Lego, White Company and various fashion retailers. To secure the right tenants you have to give them incentives.”
Sandford says Eurofund would like to purchase further shopping centres but despite the fact there are a few around they are not necessarily easy to acquire: “It needs the right price and the owners don’t want to sell.”
