Ahead of the Revo Liverpool event on the 17 – 19 September, Ed Cooke, Chief Executive of Revo took some time out to talk to RLI about the current state of the UK retail market and the challenging time that has been faced by all ahead of a particular October deadline…

We can all reflect on a challenging year in the retail property sector, as ‘the B Word’ took on a whole new meaning, continued evolution of consumer purchasing behaviour, an outdated tax system and questionable restructuring practices combined to create difficult and uncertain conditions for retailers and property owners alike.

The structural change in retail is well-documented, but in the past 12 months it has become increasingly clear that parts of the UK planning and legal systems, and many of our sector’s models of doing business are simply not designed for this age, and pace of change.

The inability to adapt fast enough has led to an unprecedented level of financial distress, in many cases managed through CVAs – now the insolvency tool of choice for retailers who need to cut costs urgently in order to Sustain trading.

We have campaigned vociferously to highlight how the legislation is being abused to enable some retailers to terminate lease agreements entered into in good faith, and in effect make a single creditor-group bear all the financial pain of a corporatE restructuring. We urgently need clarification on how and in what circumstances the CVA legislation can be invoked, and we are working with our retailer and property-owner members, as well as partner organisations including the BPF, to define ‘rules of engagement’ that mean there will be greater consultation and collaboration before a CVA is proposed

The full impact of the recent run of insolvencies will take years to play through, but it is already clear that the turmoil of the past 18 months will re-set the relationship between the traditional ‘landlord and tenant’ – a term that really should be consigned to the graveyard of corporate dialect. We hope this in turn will lead to a better, more sustainable model for leasing space and doing business.

Central to this is creating greater transparency, particularly the sharing of trading data. The UK retail market remains opaque compared to the US and other European countries which is a deterrent to property investors and means lease negotiations are approached with uncertainty and suspicion by both parties.

As the only organisation that brings together retailers and property owners we have a unique opportunity to drive a reform of retail leasing, and it is an opportunity we will grasp over the coming months.

The recent spate of CVAs has also exacerbated the problem of how to value – and indeed define – retail property. The uncertainty created by CVAs and the changing role of physical retail has caused the financial markets to
write down values, but it is becoming clear that the accepted ways of describing and valuing assets also require scrutiny as the form and function, and therefore how retailers attribute value to their physical presence, changes.

In 2018 we began a consultation on a new Revo UK Classification for Retail Assets, proposing a move away from the ‘primary vs secondary’ vernacular to a new model that classifies assets by their specific function and purpose. The result was a new code, which distinguishes between ‘Destination and Lifestyle’, ‘Community’ and ‘Specialised’ centres, according to factors including their size, catchment, occupier-profile and dwell times. We think
this more nuanced definition of retail property is helpful for the entire community, reflecting the modern retail market and the evolution of shopping centres to become multi-use assets where retail is just one component.

Finally, the march of retailer CVAs and job losses has also reignited the debate on the future of UK high streets and town centres. In October I was invited to present evidence to the Housing, Communities and Local Government Select Committee on the future of our urban centres and made
clear that Government must stop kicking the can down the road and act now to ensure these places, the social hubs of communities, still exist for the generations to come.

We have recently urged Sajid Javid in his new role as Chancellor of the Exchequer to conduct a proper review of business rates, which we and our members feel is an archaic form of taxation which does not recognise how value is created in the modern digital economy. By easing the disproportionate burden on physical retail, we can ensure the town centres of the future are vibrant places to shop, as well as work, live, socialise and spend leisure time.

It has been a tumultuous year for all of us working in the retail sector, and it looks likely to be another challenging year ahead. However, in times of change collaboration and innovation becomes more important than ever. There are already signs that many businesses in the retail property sector are adapting to the new reality, and will become more creative, sustainable and resilient in the longer term as a result.

We look forward to welcoming many of you to Revo Liverpool 2019, which will bring together the full diversity of people and organisations involved in retail placemaking, to discuss how we work to navigate today’s challenges to create the places of tomorrow.

An Industry In Transformation

With the looming Halloween Brexit date, UK retail is in a state of flux that is for the most part being driven by the ongoing shift to online and understanding changes in consumer behaviour. Over the next few pages, RLI will take a look at some of the brighter points in the UK market and highlight that it is not all doom and gloom due to the Brexit-related uncertainty facing everyone.

Edinburgh St James, Edinburgh, Scotland
Edinburgh St James, Edinburgh, Scotland

Revo, the UK’s largest gathering of people and businesses that together create, deliver, operate and occupy great places to live, work, shop, eat and be entertained will take place on the 17-19 September at the Exhibition Centre in Liverpool, bringing together over 2,200 delegates from all parts of the diverse retail property and placemaking community.

According to Cushman & Wakefield’s ‘European Shopping Centre Development Report’, the UK was the third most active development market in Western Europe in 2018, with 147,000sq m of new space delivered, of which 74 per cent was contained in two extension projects. This represented an eight per cent growth compared with the previous year. Leisure extensions, mixed-use developments and the redevelopment of vacant city centre sites were a key focus, with extensions representing 95 per cent of all new space in 2018.

There is likely to be significantly less retail space going forward, but that which remains will have a clear purpose. Moreover, it is key to note that around 80 per cent of all retail sales still occur in physical stores. Success in the future will therefore be based on a balanced approach to physical footprint, digital alignment and logistics execution.

Traditional retail will continue to play a vital role in the distribution chain, although it will likely form a smaller component of the overall tenant mix on high streets and in shopping centres and retail parks. We should acknowledge that the UK has too much front-end retail space – probably in the region of 25-30 per cent – and that store closures, whether the result of ‘right-sizing’ or retailer insolvency, will continue to be a feature of the retail market for the foreseeable future. In order to achieve this, it is likely that some centres and retail parks will need to be completely redeveloped.

Launched in October last year, ICON Outlet in London is a 210,000sq ft designer outlet shopping scheme that was developed by joint venture partners AEG and Crosstree Real Estate Partners. The ICON Outlet complements the existing entertainment-orientated offer The O2 has become world famous for, including the 20,000 seat arena, 26 restaurants and bars, an 11-screen cinema, theatre, roof walk and much more. ICON Outlet brings together over 60 of the best fashion and lifestyle brands, at up to 70 per cent off retail prices, under The O2’s world-famous roof.

Construction is almost complete on the new Kingsmere Retail Park on Oxford Road, Bicester and it is due to be completed in October. There has been a total capital investment of £40M, making it one of the most expensive retail schemes in the UK. Well-known brands like M&S Simply Food and Next have already signed up with their flagship stores, meaning that local residents will soon be able to enjoy some of the leading brands. Once complete, this new retail park will build on the success of Bicester as an attractive retail, residential, and commercial centre.

ICON - 1
Icon Outlet at o2 – London, England

On course to open all remaining phases, Heart of the City II is one of Sheffield’s key economic projects. Backed by Sheffield City Council, with Queensberry as its key delivery partner, it is not just a retail scheme, but a mixed-use, vibrant quarter right at the heart of the city and synonymous with everything the city is trying to achieve. The scheme builds on the hugely successful original Heart of the City project that kick started the regeneration of Sheffield city centre at the start of the Millennium. The new mixed-use scheme will comprise of high-quality retail, Grade A offices, hotel and residential developments, restaurants and cafés, leisure destinations, parking and stunning public realm.

Due to completely open in 2020, the ongoing Wembley Park development in London by developer Quintain continues to open in stages as it prepares to become one of Europe’s biggest regeneration projects. Cushman & Wakefield and Nash Bond have been instructed to lead a new phase of retail and leisure leasing at Wembley Park. A further 180,000sq ft of space over 42 units is being allocated in nine new buildings across the landmark north-west London scheme. The additional retail and leisure space will help cement Wembley Park’s fast-growing status as an exciting new destination to rival the very best areas of London.

Scotch Corner Designer Outlet – North Yorkshire, England

Bargate Quarter will uncover Southampton’s proud history, 900 years after the legendary monument was built. The 400,000sq ft project will redefine retail in the heart of Southampton. The scheme will offer a variety of carefully selected retail, food and beverage choices and its stunning centrepiece is one of the finest sections of the city’s historic wall. Creating a vibrant, aspirational hub that celebrates an iconic heritage, while drawing a discerning crowd. The developer of the project is Tellon Capital and the exciting new scheme is expected to open in 2020.

Also opening in 2020 is Scotch Corner Designer Village by developers Scotch Corner Richmond LLP. The new scheme is set to be the fifth largest outlet centre in the UK and the leading outlet shopping and leisure destination in the North of England, bringing an appealing mix of premium and best-of high street brands to one of the UK’s most well-known locations. Scotch Corner Designer Village will include 92 new shops including 10 restaurants and cafés and will benefit from 1,300 car parking spaces.

Heart of The City II – Sheffield, England
Bargate Quater – Southampton, England

The solution for unlocking Warrington is beginning to take shape as Time Square: the £110M mixed-use development driven by Warrington & Co, on behalf Warrington Borough Council and development manager Muse Developments. Due for completion in the first quarter of 2020, the scheme will serve as a new beating heart of retail and leisure – sensitively developing Warrington into a destination in its own right, rather than a satellite to Liverpool and Manchester. Attracting locals and regional visitors alike, the scheme is set to significantly drive footfall in the town centre with first-rate dining, a 13-screen Cineworld complex, Grade A offices, a social public square and ample car-parking. Time Square also incorporates the town’s historical elements, with older façades respectfully repurposed to house a contemporary, European-style market and food hall offering – expected to drive 25,000 visitors per week alone.

Wembley Park
Wembley Park

Based upon a masterplan that was approved in 2011, the iconic Grade II* listed building and surrounding area of Battersea Power Station is being reimagined as a place for locals, tourists and residents to enjoy a unique blend of restaurants, shops, parks and cultural spaces. This 42-acre, eight-phase regeneration will create hundreds of new shops, restaurants, offices, cultural, venues, homes, a hotel and over 18 acres of public space, including a new six-acre park. The Power Station itself is set to become home to Apple’s new London campus, opening is down for 2021 and the scheme will become of the capital’s top retail and leisure destinations.

Forty glass-fronted stores and restaurants will be built to create a 135,000sq ft upmarket shopping destination to rival St Pancras International at the former Waterloo Eurostar Terminal, with developers hoping the scheme will open by April 2021. London and Continental Railways have already signed Time Out Market as an anchor tenant, consisting of 17 restaurants and three bars across two floors. Once complete, the destination will be certainly popular with commuters, and it will try to replicate the success of King’s Cross St Pancras, which saw retail sales grow 10 per cent on a like-for-like basis in the 2018 Christmas period.

Full planning consent has been approved for a £270M regional leisure destination in Swindon. Phase one of the North Star Village, by SevenCapital, received the go ahead this evening, less than 17 months after the leading UK developer took the reins on this much-anticipated project. Set to have a game-changing effect on Swindon and the surrounding area, the North Star Village complex will feature circa 500,000sq ft of retail, dining and leisure, including one of the UK’s largest ski and snow centres, with two real snow indoor ski slopes. It will also house a 13-screen cinema, including Europe’s largest IMAX screen, along with a 19-lane bowling alley and circa 27,000sq ft of trampoline space. Developer SevenCapital is aiming for a 2021 completion date.

Regeneration experts Queensberry, in partnership with Barnsley Metropolitan Borough Council, have announced that Nando’s will be the latest restaurant to commit to The Glass Works, Barnsley. The legendary ‘peri-peri’ restaurant group has agreed to take 3,634sq ft on a 20 year lease at the £180M transformative town centre scheme that combines retail, leisure and cultural uses. The Glass Works will offer 500,000sq ft of diverse retail and leisure uses, including a 13-screen Cineworld and Superbowl UK. Retail anchor NEXT is already signed up to the scheme, along with Muffin Break, independent restaurant MEET and JD Sports – with the latter opening later this year. The new retail, leisure and cultural uses will sit alongside a 494 multi-storey car park and high-quality public realm, creating a new civic meeting place and greater connectivity to the rest of the town. The new town centre is due to launch in spring 2021 and estimates suggest the scheme will generate approximately 1,100 new jobs by 2025.

Central Plaza, Dublin, Republic of Ireland
Central Plaza, Dublin, Republic of Ireland

Meanwhile in Scotland, possibly the biggest redevelopment in the country is taking place in Edinburgh, the Edinburgh St James project is being developed by Nuveen Real Estate and is on course for a 2020 opening. A world-class example of city-enhancing placemaking, the scheme has had more than £1bn in investment and will create a 1.7 million square feet urban resort, comprising 850,000sq ft of retail space. The project will be anchored by John Lewis, a five-screen Everyman Cinema, luxury aparthotel brand Roomzzz, and a world-class 244-room W Edinburgh, representing the hotel brand’s first hotel in Scotland. The Edinburgh St James development will strengthen Edinburgh’s global standing by transforming the city’s east end and become an inspiring, attractive and vibrant destination for people to live, shop, experience and play.

The next phase of the regeneration of the Glasgow waterfront has taken a significant step forward following the submission of an Approval of Matters Specified in Condition planning application for a transformational 350,000sq ft mixed-use development at Glasgow Harbour. The investment into the city will deliver a new waterfront destination on the river Clyde along with thousands of associated retail and construction jobs, revitalising a key gap site and making Glasgow a city on the river not by the river. The Glasgow Harbour Lifestyle Outlet, which is scheduled to open in 2021, will include retail space, restaurants and cafes, a waterfront promenade, a new cinema, gym, family leisure facilities, public square and event space will deliver vibrant outlets with a balanced combination of entertainment and experience as it becomes a major leisure attraction in the city.

Northern Ireland’s award winning outlet centre, The Boulevard which is owned by The Lotus Group had a successful relaunch last year after a high level of investment totalling over £7M. This has led to record footfall and turnover for the year of 2018. The Banbridge-based premium shopping centre is bucking the industry-trend with an impressive +12 per cent footfall, +16 per cent turnover and +14 per cent ROI visitors when compared to the UK average of -2.6 per cent in December 2018. The expansion of the retail offering, an investment in redevelopment and enhancement of the customer experience highlights what it takes to drive footfall.

Battersea Power Station
Battersea Power Station
Glasgow Harbour
Glasgow Harbour – Glasgow, Scotland
The-Boulevard, Banbridge, Northern Ireland
The-Boulevard, Banbridge, Northern Ireland

Central Plaza, an upcoming project in Dublin in the Republic of Ireland by developer Hines, in conjunction with the Peterson Group and leasing agents BNP Paribas Real Estate Ireland is due to complete in late 2019, with the first tenant openings expected in early 2020. The project is a dynamic new retail hub on Dublin’s favourite north/south shopping route. This has always been one of the city’s livelier pedestrian zones and now people will have a number of reasons to stop and linger. An iconic city plaza and three of the area’s most distinctive buildings are being remodelled to create a new shopping destination that’s full of character – and choice eateries. Upon completion, the scheme will provide 12,500sq m of retail, food and beverage and office space.

Also in the planning pipeline by Hines is Cherrywood Town Centre. Recently granted planning permission, the scheme will comprise a town centre of approximately 67,000sq m, providing a new quadrant of retail, leisure, cinema and F&B in south county Dublin. The new town centre will be constructed on an elevated site integrating the existing Luas stops at Cherrywood and Bride’s Glen. Delivery of the new build is expected in 2021.