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Omnichannel starts to define retail success

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Omnichannel is starting to become a defining factor in whether retailers succeed in the current retail market, according to the Land Securities Group .

The UK’s largest commercial property company, which today released its half-year results, said in its analysis of the retail market, “We are seeing a polarisation between the retailers who are strong and have invested in omnichannel and those that have not.”

Other changes it sees in the retail market include movement of consumer spending from secondary retail centres to prime ones. “However,” said the statement, “the categorisation between prime and secondary has become more complicated and is now influenced by asset management, targeted marketing and the experience being delivered as well as the traditional elements of scale, accessibility and quality of environment.”

Land Securities says that in the context of way retail is changing, it will continue to move out of assets in “non-core locations,” while instead identifying “winning locations and actively managing assets for growth.” The strategy will see it look to develop in city centres such as Glasgow, Oxford and Guildford, while in the short term developing retail warehouses. “We have also been diversifying into leisure, both standalone and within shopping centres, to balance the challenges of structural change in the retail sector.”

Land Securities’ retail portfolio, which includes Trinity Leeds (pictured) and The Printworks, Manchester, was valued at £5.6bn on September 30, with shopping centres and shops up by 0.2%, retail warehouses and food stores down by 1.8%, and leisure and hotels up by 1.4%.

Looking to the future, the Land Securities statement said: “Although there is a more stable economic outlook with improved consumer confidence, structural changes will continue to impact the sector, notably: an increased emphasis on omnichannel, shopper convenience, new retail formats and leisure. We have altered the balance of our portfolio to meet these trends and will continue with this approach. We have established a competitive advantage with our acquisition of a standalone leisure portfolio and this, together with our development capability, and plans both in town and out-of-town, gives us confidence that we will deliver good returns for shareholders.”

In the six months to September 30, Land Securities valuation surplus rose 1.9% to £209.8m, while pre-tax profits rose by 202.8% to £397.9m. Revenue profit rose by 8.9% to £156.5m.

As well as focusing on the changing face of retail, Land Securities is focusing on office development in London, where its landmark buildings include the 20 Fenchurch Street development, the so-called Walkie Talkie tower, blamed for melting a Jaguar this summer when strong sunlight reflected off the building.

Notwithstanding, said Land Securities, the building is still attracting new tenants and is now 56% pre-let. “Despite the solar glare issue of the summer,” it said in a perhaps tongue-in-cheek comment, “occupiers have not been blinded to the efficiency and location of the building.”

Our view: A new theme of retail is nicely summed up here by Land Securities here when it describes the polarisation between the ‘haves’ and ‘have nots’ of omnichannel retail. On the same day as this story runs, we also report on the failure of Barratts and Blockbuster as they move into administration, both left behind by the fast-changing way that we now shop. But we also report on the success of New Look, which has embraced multichannel retail, to its profit. We think the importance of investing in omnichannel is graphically illustrated by all three of these stories.

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