Perspectives 2019

Company restructuring and management of debt and cost pressures. 5. Rise of general discount retailers and food retailers. Rise of online shopping. Relaxation in planning laws and consents which has allowed numerous out-of-town and in town retail developments. 1. 2. 4. In the last 15-20 years the UK's high streets have seen significant change, much of which can be attributed to five factors: Changes in traditional consumer shopping patterns such as time and frequency of purchase. 3. Changes in consumer shopping patterns are also an increasingly important factor. We are now seeing more diverse household types whose shopping trips vary significantly in terms of distance travelled, time of day and frequency. The Internet is also undoubtedly responsible for some of the competition that high street retailers face, but this needs to be kept in context: 80% of retail sales in the UK are still completed by way of a physical platform. Bucking the trend These challenges, however, only account for half the picture – and many retailers continue to flourish for a variety of reasons. Outlets as diverse as Holland and Barrett, White Stuff, Vans, Urban Outfitters/Anthropologie and Jo Malone continue to perform well, perhaps due to the irreplaceability of the hands-on retail experience for certain goods. Due to its positioning and a unique retail offer on endorsed sports products, JD Sports had a rise in pre-tax profits last year, and its stores continue to play a central role in its business plan. Similarly, both Next and the core Sports Direct business continue to occupy and trade well from prime locations – great examples of retailers who have embraced multiple formats with equally strong out-of-town and online offers. So what factors are increasingly allowing some businesses to survive where others are failing? The retail experience Increasingly, strong positioning on the high street is becoming a greater determinant of success – borne out by several examples of tenants going through a CVA yet choosing to retain core high street holdings. We have also seen the rise and development of more experience- orientated offers such as Apple, Nespresso, Hamley’s and the Starbucks' Roastery model. For these retailers to be successful on the high street, the right location is more important than ever. With high footfall often the leading factor in a location choice, we are also seeing increasingly specific demand in town centres, sometimes for sections of a single street. For instance, new developments on Buchanan Street in Glasgow have capitalised on existing shopping patterns to extend the prime region of the street northwards, making it the focal point of the city’s retail to the detriment of Sauchiehall Street and Argyle Street. Similar factors in Edinburgh have shifted the retail focus on Princes Street east towards St Andrews Square and the new St James development. Further afield, the same pattern can be seen at the western end of Oxford Street in London, with Zara, H&M, Next and Primark all opening flagship stores. Tackling decline in department stores Retailers also need to recognise when their offer is weak and take decisive steps to reverse the decline. House of Fraser arguably provides a good example of where the market is heading in this regard. After undergoing a high- profile CVA last year, the chain was ultimately bought out of administration by Mike Ashley’s Sports Direct. As a result, the doors have closed on a number of unprofitable sites – a move which will likely lead to a much stricter selection process for their high street locations, in tandem with repositioning and a stronger push of their online offer. Recently, John Lewis has faced its own challenges, reporting a half-year loss of £61.8m, compared with a pre-tax profit last year of £117m. It is understood that investment in new IT systems, increased basic staff costs and Brexit uncertainty (affecting consumer spending) are the drivers behind this drop. It remains to be seen how John Lewis will respond. The firm has adapted quickly to changing consumer behaviour in the past – for instance they were one of the first department stores to fully embrace online retailing and now boast a strong digital presence with their popular click and collect service. The recent restructure announcement with John Lewis and Waitrose consolidating their operations, suggests that they will be quick to meet the challenge. It is not all doom and gloom for department stores, however. Selfridges and Harvey Nichols, have both successfully tailored their offer to the luxury market while also centring it around the consumer experience. Repurposing for wider appeal There is little doubt that the high street will continue to be a focal point for most towns and cities, but in many cases it will need repurposing to provide for a broader range of uses and a more organic space. Most importantly, our town and city centres will need to offer an environment that draws people – a place where they want to live, eat, shop, and have fun. This means that alongside retail, there should be an energetic mix of leisure, residential and other commercial uses. For those department store sites that have closed, we are seeing opportunities not just for retail subdivisions but also for a variety of other uses, such as hotels, leisure and tourism. The former House of Fraser at the west end of Princes Street in Edinburgh is about to be transformed by Diageo for a new Johnnie Walker Experience, which will incorporate a museum/ interactive space as well as rooftop bars and restaurants. Conventional wisdom would suggest that in many town centres the changes needed will require a 20-year+ time frame, but the high street may not have that long. In order to thrive again, high streets will need to transform themselves within the next decade: a goal that will require not only funding, but also strategy and decisive action. CUSHMAN & WAKEFIELD 11 THE HOT TOPIC