Well-placed stores continue to be important to retailers operating in a difficult retail market, property developer and operator Land Securities said as it reported half-year results today.
It says retailers are feeling the effect as costs increase and consumer spending is hit. At the same time, more retailers are going into compulsory voluntary arrangements (CVA) in order to cut rents or end their leases. That has hit, says Land Securities, retailers’ demand for space in locations where their stores are performing less well. Investors are now cautious about the sector.
Nonetheless, it said, “Physical stores in the best locations continue to be important to retailers, and our portfolio of great destinations continues to attract occupiers, maintain high occupancy levels and is relatively less impacted by CVAs than the wider market.”
Chief executive Robert Noel said the company had delivered a “robust performance in an uncertain market.”
He added: “In retail, our focus on vibrant destinations that offer the most engaging experiences for retailers and consumers has served us well in tough market conditions.”
Land Securities pointed to its Bluewater, Kent centre where JD Sports plans to double its floorspace before Christmas as demand grows for its athleisure product range. In addition, Primark is currently fitting out a new 60,000 sq ft store, Apple has upsized its store and the first UK BMW Urban store opened last spring. There’s a new Timberland store at Trinity Leeds, while River Island has expanded its Trinity Leeds presence into a new flagship store.
It’s also working to improve both shoppers’ experience at its centres, by expanding its cinema offer, and its own retailer customers’ experience through a new “black box revolution” that aims to lower the barriers to trading in its centres by providing ready-to-move-in units on short-term leases. It also plans to give traders feedback about their customers and their shopping behaviours.
Beyond its main centres, Land Securities is looking to develop mixed-use sites that include housing at suburban retail sites that are well-connected for transport.
Land Securities reported revenue profits of £224m in the half-year to September 30. That’s up by 10.3% on the same time last year. Pre-tax profits of £42m were up from £34m a year ago – a rise of 23.5%. At the same time, the valuation of its properties fell by 1.4% to a deficit of £188m, from a deficit of £19m last time.
Fewer people visited its centres during the half-year, with footfall in regional shopping centres and outlets down by 2.3%. The number of empty shops stood at 3% during the half-year – up from 2.7% last time. The number of units occupied by retailers in administration stood steady at 0.7%.
Same-centre sales were down by 1.4% on last time. That contrasts, says Land Securities, with a national benchmark that showed a 2.1% fall in like-for-like store sales – a figure only lifted into positive territory – at +0.1% – by the contribution of online spending.
The figures come in the same week that British Retail Consortium/Springboard research suggested visitor numbers to stores fell by 2% in October, compared to the same time last year. The BRC-Springboard Footfall and Vacancies October 2018 report said the drop in footfall was for the eleventh month in a row, and that it was also part of a pattern that saw footfall decline by 2% in October 2017 too. It said: “These numbers reflect the ongoing trend of declining footfall. however, there are signs that consumers are waiting for Black Friday and seasonal discounts before visiting shops.”
The Springboard figures showed footfall in high streets (-2.3%) and shopping centres (-3.3%) hit harder than in retail parks (-0.2%). Helen Dickinson, chief executive of the British Retail Consortium said the figures reflected the “continued long-term decline in footfall,” adding: “This trend is primarily driven by a move from in-store to online purchases.With retail becoming more digital, physical shopping locations are working to reinvent themselves as places people go for days-out rather than just for day to day purchases.
“Nonetheless, vacancy rate is at a 15-month high, with many brands disappearing from the high street, and many more struggling under the cumulative burden of public policy costs.”
Case study: BMW Urban
The BMW Urban store at Bluewater is designed to enable customers to browse and buy the BMW range by combining digital and physical retailing. Shoppers can see and try out the physical car and they can also browse online from the store. Shoppers visiting the BMW Urban store (pictured) can use a click and buy iPad wall to buy a new car, arrange a test drive, explore product specifications through a touchscreen table, or call on the assistance from either a human “product genius” advisor, or from Pepper the Robot, who can supply details including store and product information and customer feedback.
When the BMW Urban store opened, in April 2018, BMW chief executive Graeme Grieve said: “Our Urban Stores around the world reflect the values of our brand; a focus on technology, efficiency and pleasure, delivered in a way that benefits the customer. Bluewater is a prime location for BMW customers, and I look forward to seeing its popularity with its visitors.”
Images courtesy of BMW