FSP Retail Blog
Future of town centres hinges on planning policy
Managing Director Geoff Nicholson comments in Retail Weeks' Letters To The Editor on an article from issue 12th March 2010. Link unavailable.
The recession was triggered by failure to control market trends, which are driven by often short-term investor interests, not by consideration of longer-term social benefits. So Catherine Tobiasinsky’s plea (RW, last week) that planning policy should not subvert market trends in breathtakingly short-sighted.
Yes, in-town retailing has been under pressure from out-of-town locations. But the economic and social costs of allowing town centres to die are incalculable. The Preston Tithebarn issue is nothing to do with its in-town location and everything to do with its potential impact on neighbouring towns.
It is the charge of the planning system to reconcile the demands of the market and social need. It makes sense, for the interests of society, to flavour in-town development. This is not to claim out-of-town schemes are never appropriate: the two are not mutually exclusive.
The bleak outlook for in-town retailing reflects the historic failures of planning policy. But to advocate its abolition is to remove all hope for a better future for town centres.
Geoff Nicholson
Managing Director
FSP Retail
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A bird in the hand is worth two in the bush...
…but are they all of equal value? In shopping centres and retail parks, recruiting particular tenants within an explicit retail mix strategy creates a more robust rent roll than simply taking the highest, or any, bidder. Without a tenant mix policy, the retail composition of the centre or park is determined by the judgements and vagaries of individual retailers.
Rent is paid from turnover and the lower its proportion the better. The proportion can be reduced either by agreeing a lower rent or by increasing turnover. Other things being equal, retailers whose customer profile matches the visitor profile will increase turnover more easily than mismatched retailers. Furthermore, several retailers with similar customer profiles outperform a ragbag of differently targeted shops. Historically, retailers in the same trade tended to group together in the same area of town.
There are five broad objections to shopping centres and retail parks having an explicit tenant mix strategy:
- Retailers know their own business best, so don’t second guess them.
- We’ve managed successfully so far without a retail mix strategy.
- It’ll only tell me what I already know.
- It’s a sledgehammer to crack a nut.
- A different skill set is required to present the business case to retailers when it flows from an evidence-based retail mix strategy.
This over-estimates the resources of retailers and their agents to know the potential of your particular location. In FSP experience, the vast majority of retailers welcome solid evidence of the scale of the business opportunity represented by your centre or retail park
This omits the role of shoppers in making a retail location successful. FSP can demonstrate that happy shoppers visit more often and spend more per visit so that annually they are worth two or three times more than an unhappy shopper. Creating more happy shoppers increases sales, makes the retailers more profitable and therefore willing to pay more for their space. Establishing the identity of the happy shopper is therefore a fundamental step
In Made to Stick, Chip and Dan Heath describe the Curse of Knowledge which prevents experts from being able to see the issue from the perspective of the uninitiated. A tenant mix strategy gives a different emphasis to what is already known and thereby effectively communicates the potential of the location to retailers
On an established scheme, units come up one at a time, so the expense of developing a retail mix strategy is not justified. While more centres now have multiple vacancies, this may be a valid objection if the task is simply to fill it and flog it. However, FSP has been involved in a number of pre-acquisition due diligence investigations where such a policy has cut no ice with the potential purchaser
It can be difficult for letting agents dealing with many different schemes fully to understand the potential of each one for each target retailer. Much of the responsibility for this lack of understanding lies with the research providers who don’t make the evidence very accessible. Naturally FSP pleads not guilty to this charge but only because it is a high priority to work with the client and letting teams to translate the research into practical actions.
I now look forward to a flood of enquiries for help in developing tenant mix strategies!!
With kind regards,
Geoff Nicholson
What Would Confucius Say?
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Recession, what recession?
Home Town versus Clone Town
The Better Retail Property Guide - Henny Penny or If?
Delays in five retail developments have recently been announced. In Chester, Dumfries, Newbury, Newport and Portsmouth, respected and experienced developers have put major projects on hold. In each case, rising costs of construction, land acquisition and market conditions have been blamed.
Who provides the better guide to the appropriate response - Henny Penny, who in the nursery rhyme was hit on the head and immediately assumed the sky was falling or Rudyard Kipling in his popular poem, If?
Clearly, the UK retail property market is at a point of inflexion and its direction in both the short and longer term is uncertain. However, the fundamental drivers of successful retail developments remain the same – sufficient unsatisfied demand from shoppers for a better place to shop, suitable available space for shops and retailers able to delight the identified shoppers. The challenge is not that the fundamentals have altered. The new imperative is for a more thorough understanding of each element and their inter-relationship.
For example, shopper requirements need to be quantified more precisely and greater insight into shopper requirements teased out. In an increasingly competitive environment, a new development is in itself not enough. The shopper demand has to be understood as coming from distinct consumer segments. We all understand that a Porsche or BMW buyer is different, and wants something different from a Skoda customer. The distinction is less well understood when it comes to shopping centres. To choose two centres at random, how do MetroCentre and Newcastle shoppers differ? Are these two shopper groups different from one another or the same people looking for a different experience or different merchandise at each location?
If the need in the present uncertain market is to understand both shoppers and retailers more thoroughly, then neither Henny Penny nor Rudyard Kipling is a particularly helpful guide. The sky hasn’t fallen but nor is a stoic forbearance an appropriate response. What’s needed is a better understanding of the drivers of the retail property market. Surprise, surprise – just what FSP offers!
Imagination is more important than knowledge
Imagination is more important than knowledge
Albert Einstein’s insight is surprisingly pertinent to retail property professionals who commission research projects.
The retail property market has various sources of information about shopping catchment profiles. Each producer, whether CACI, Experian, the National Survey of Local Shopping Patterns (NSLSP) or one of the others, will argue that his is the best system. Independent consultants, such as FSP, take the view that each system has its benefits and drawbacks, so the best one to use depends on the problem to be solved.
However, in numerous discussions with ex-CACI Directory of Retail Property Consulting, Ken Gunn, since he joined FSP, it has become clear that the differences between the information systems are far less important than their interpretation. The quality of a retail property consultant lies in the ability to understand the implications of the data, to correctly target the shopping centre and its tenant mix. This is a skill that combines both analytical ability and retail experience. Amongst the FSP consultants there is now a total of over 60 years experience of retail property consulting. This gives FSP an unrivalled depth of experience complemented by the ability to choose the best system for the task in hand.
Therefore, in commissioning retail property research, it is worth focusing on the experience and track record of the consultant who will interpret and apply the information. Of course the data underlying the analysis is important but even more important are the inferences and recommendations that flow from the work.
The full Einstein quotation is, “Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.” FSP does not claim all this but is not afraid to use its imagination.
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