Rhys Evans, Head of Asset Management at Pradera Lateral, the team behind the Trafford Centre in Manchester, discusses the ‘flight to prime’ trend and what it means for retail destinations.
The retail market is a dynamic entity that is heavily influenced by multiple factors, including design, consumer trends, the economy, regional preferences, the list goes on. One phenomenon we’re seeing across the board, likely due to all of these factors, is the ‘flight to prime’, whereby both occupiers and customers gravitate towards centres offering the most attractive experience.
Defining what the most attractive experience looks like is tricky, as it won’t be the same for every shopper or visitor. This is why breadth and variety of offer are both key to building the desirability of a destination. Whether a customer is looking for experience, quality, convenience or a seamless journey, this layer of relevance creates the sweet spot that pulls visitors in and keeps them coming.
In today’s retail market, consumers have more options than ever before, which means they have the luxury of choosing where to spend their money. From virtually browsing online baskets with same-day delivery to physically browsing a bricks & mortar centre for a day out experience, customers can select what is most attractive to them. This puts the onus on retail destinations to make themselves the standout choice.
When it comes to town centre shopping, flight to prime is rather less applicable. Local high streets have generally grown from more organic origins and don’t have the tailor-made back-of-house set-up that designated shopping centres have been designed with. The larger, international tenants tend to find a natural home in shopping centres, with town centres providing a home for more traditional retail day-to-day offerings.
At the outset, landlords and asset managers need to focus on the areas of their schemes that need bolstering to build a more rounded offering that will appeal to a wider audience. What does the customer want or need and are you providing it? By incorporating a variety of occupiers, the offering will draw a wider mix of customers. For larger schemes this will mean a mix of categories and user classes, so diverse fashion brands, diverse food offerings and diverse leisure, as well as alternative uses, such as medical offers.
From a retailer perspective, we have seen increased curiosity around understanding our strategic approach to leasing and building out the different categories. Interested parties will seek relevant adjacencies that could bolster their own trade in a shopping centre. It’s certainly something we’ve seen work very successfully at Trafford Centre where we’ve created clusters of like-minded brands, such as Dyson, Hugo, Boss, and Calvin Klein.
This is where flight to prime can become a bit of a self-fulfilling prophecy in that, once a centre has established itself as one of these prime locations, it will then begin to reinforce this status by attracting more and more desirable tenants and offerings, making it more and more desirable again. This makes prime locations extremely appealing, as brands will be exposed to higher levels of footfall and potential spend, a big determinate in profitability. It will also often mean they benefit from the specialised management that goes with managing prime assets.
Destinations vary, of course, and some are better placed than others to implement this approach. Others may face unavoidable challenges, such as high levels of competition or not having the necessary scale to manipulate tenant locations. The flight to prime phenomenon will also be affected by regional factors, as some brands will trade better in certain areas of the UK. This is particularly true of fashion, but it is also seen in F&B, so landlords will be acutely aware of this when planning their tenant mix. For all centres, there is always a way to understand what your catchment and customers require and it doesn’t always have to be traditional retail.
Thanks to the ongoing evolution of flight to prime, certain destinations are becoming increasingly competitive. Vacancy numbers are shrinking, presenting a growing challenge to retailers, with multiple brands beginning to chase the same unit. This shift is affecting leasing too, with flexibility built into terms to ensure that, if either party is not faring well, there are mechanisms to allow an earlier parting of ways. It is common now to include performance clauses within lease terms.
There is also a greater focus on tenant trading forecasts in the decision-making process – centres will want tenants delivering strong sales figures. Flight to prime has heightened the requirement for strong data analytics in retail destinations. Understanding your customer and catchment demographics is imperative to forecasting how brands will trade, feeding into the leasing process.
There will always be a focus on prime schemes for larger tenants, however this will only become more competitive as these schemes get stronger and occupiers will need to remain nimble in choosing where to secure space.
