UK retail stores must adapt to the rise of digital shopping or become obsolete, British Land warned today.
Announcing its full-year results today, the property investor said stores remained central to UK retail in a world increasingly dominated by online shopping. But physical and digital shopping must be integrated, with stores becoming showrooms, as well as pick-up and return points.
Reporting a fall in full-year profits, British Land said its UK retail business had been hit by the “twin challenges” of lower consumer spending and the growth of online sales. But it was now key to adapt to the changing way that people now shop. Those stores that could not be adapted were, it warned, “essentially obsolete.”
“Too much of the available space in the UK is not well-suited to these changing needs, or can it be economically adapted,” said British Land in its full-year statement today. “Although retailers are reducing their overall space requirements, demand for the right type of space remains strong and as a result the retail property market continues to be heavily polarised between the right space and that which is essentially obsolete.
“Our retail property strategy therefore focuses on aligning our properties closely to the changing needs of retailers and consumers ensuring we remain at the forefront of market evolution. Our portfolio is well balanced to the way people shop – rational (purpose-led) and emotional (experience-led) – so our retail destinations are focused on experiential, convenience or functional shopping.”
The property investment company, which has 60% of its UK portfolio in retail and which is planning to exit its “subscale” European business, said: “The way people shop is changing. The internet lies at the heart of these changes not only because of the immediacy of being able to buy online but also because of the way it enables consumers to compare prices and quality, share their opinions and shape the development of new products and services. The line between online and physical sales is getting increasingly blurred with the majority of sales more likely to have some sort of digital aspect.”
Citing a recently-struck long-term partnership with BT to introduce free wi-fi to all its shopping centres and find a way to extend wi-fi across retail parks, Chris Grigg, British Land chief executive, said: “This will allow us to expand our digital platform and exploit technological innovations.”
He added: “In this environment, it is even more important to have the right assets, the right approach and an ability to adapt in a fast-changing environment.”
In the year to March 31, the property investor said its retail portfolio had outperformed industry indices. But pre-tax profits of £260m were down from £479m last time. Underlying profits, however, rose by 1.9% to £274m. Its portfolio valuation rose by 0.5% to £10.5bn over the year.
The company said highlights included this month’s opening of the Whiteley Shopping Centre which is more than 90% pre-let.
Retail assets make up 60% of the British Land portfolio, which also has major holdings in office space. The company currently runs about 29m sq ft of retail space, across 80 retail parks, 91 superstores, 17 shopping centres and 13 department stores.