11 June 2018
Shopping centre asset management. What does the future hold?
With increasing competition from online retail giants and the speed of development of the virtual shopping experience, traditional shopping centres are faced with a challenge to maintain their footfall and attract new shoppers in this competitive marketplace.
Over the last 10 years there has been a marked change in the tenant mix of shopping centres. 10 to 20 years ago a shopping centre was a destination purely for its retail offering (for clothes, footwear and consumer items). Recently, there has been a greater emphasis on providing an “experience”, for example with the addition of bowling alleys and food and beverage units, in particular casual dining restaurants and cinema spaces.
Our successful in-town retail clients have increased the space within their centres used for food and beverage and leisure uses to contribute to the shopper experience and to make their centres a destination for a day or evening out. Centre owners are having to move away from filling their space with retailers and use imaginative and inventive ways to create a destination to attract visitors.
One client, a regional shopping centre, has altered its tenant mix through significant investment to create a floor of “outlet” retail, anchored by a large national clothes retailer. This was a new concept in the UK, providing what was traditionally an out of town shopping experience in a city centre location. The centre now has a floor of outlet retailing, a floor of general retail and leisure uses on the ground floor. The centre also has a Cinema providing a variety of retail and leisure uses. I expect similar approaches to asset management to become a necessity for successful shopping centre management in the future.
To provide an experience at a shopping centre, thought needs to be given to the mix of tenants. The range of retailers needs to attract the public into visiting the centre and enhance their experience in order to lengthen their stay, make them visit other parts of the centre and encourage them to return. Pop-ups and temporary lettings can be a way to illustrate the diverse range of retailers and occupiers and can also provide an additional landlord benefit in a saving of business rates. These can also involve community and art projects appealing to new visitors. In addition, consideration should be given to how the malls and the walkways in the centre can be used by members of the public to increase dwell time, for example additional seating areas and screens displaying events in the centre and local community, demonstrations and special promotional events.
Asset management is an ongoing process and an asset manager needs to be planning 12 to 18 months in advance of lease expiry dates for the management and future development of the centre. If the landlord is planning to develop an occupied unit, thought needs to be had as to whether it is possible to relocate the tenant to another location in the centre or whether the landlord requires possession.
For many asset managers, it can feel like trying to predict the future, but a planned strategy can help with the ongoing challenges in the retail space. There are numerous issues for the landlord to consider if they wish to take possession of a unit that is currently let especially if the lease is protected by the Landlord and Tenant Act 1954. This is where seeking legal advice can be a valuable tool in helping you form your future strategy. Our specialists can form a part of your team for future proofing your assets, offering commercial advice on trends in the market place and providing guidance through potentially complicated legal issues.
Please contact our retail specialists if you would like to discuss this further.