Experience-led destinations will be key to the future of the retail industry as shopping habits change and traders’ costs increase, Land Securities’ chief executive Robert Noel said today.
Shoppers buying habits are changing, while they are also less confident about spending as inflation outstrips pay rises, he said. At the same time, retailers are seeing costs increase, thanks to rising business rates, the introduction of a National Living Wage and increased investment in multichannel technology.
“Retailers are operating in tough conditions,” said Noel as the retail property developer and operator announced full-year results. “As for retail real estate, the gap between the best space and the rest keeps growing. To thrive, an asset must be dominant in its catchment and provide convenience or experience. The successful leasing of Westgate Oxford speaks volumes for the value of experience-led destinations – delivered in the right way in the right location. There’s clearly an important role for great physical retailing in a multichannel world, not least enabling brands and shoppers to connect in a variety of exciting ways.”
But despite the growth of online, shoppers still want to go to stores. More than 85% of retail spending touched a store in some way, said Land Securities, with the retail property market now polarised between destination centres and convenience. A good visitor experience based on a mix of retail, food and leisure could encourage shoppers both to stay for longer and to spend more.
Land Securities had responded, said Noel, by focusing on dominance, convenience and experience as it develops destinations including Westgate Oxford, added during the last year to a portfolio that includes Bluewater and White Rose, Leeds. The business says it is now the largest cinema landlord in the UK: screens, it says, attract visitors, keep them for longer and boost takings at restaurants. Virtual reality also arrived in its shopping centres, with an in-cinema VT scene at Curzon, Westgate Oxford, and a VR-enabled stores at Virgin Holidays in Cardiff. It also ran pop-up experiences over the year, including 3D chocolate printing.
It aims, said Noel, to be the “best property company in the UK in the eyes of our customers, communities, employees and partners. Their experience of us determines whether they will continue to support us, and their support is vital if we’re to sustain our business. In a year that saw the tragedy at Grenfell Tower and the collapse of Carillion, the importance of good governance, long-term thinking and a wider social purpose has been brought sharply into focus.”
Noel concluded: “Further out, profound change in the way we work, live, shop, play and travel will be a much greater force in determining which companies are sustainable. We will continue to address and identify opportunities from the big drivers of change in our market sectors, from product innovation to sustainability, adapting our portfolio as appropriate. We are well equipped for this with a great and increasingly diverse team, alert to change, with the expertise to provide great experiences for our customers and communities – helping businesses and people to thrive.”
Noel was speaking as the property company, which develops and operates both retail and commercial space, reported reported revenue profit of £406m in the year to March 31 2018. That was 6.3% up on the same time last year, but the company also reported a valuation deficit of £91m, down 0.7% on last year. Shopping centres fell in value over the year by 3%, with the value of Bluewater down by 11%. Retail park values were 1.1% down. Footfall in shopping centres fell by 1.9%, contrasting with a national benchmark figure of 2.5%. Pre-tax losses came in at £251m from a profit of £112m last time. It also announced a new chairman, as Alison Carnwath retires from the role after nine years, and is being succeeded in the role by Cressida Hogg, a non-executive director at the company since 2014.
Image courtesy of Land Securities.