The last decade has been challenging for many high streets and shopping centres, with increasing void rates, competition from online shopping and changes in consumer spending habits capable of affecting even the most successful retail locations.
As a result, secondary locations have been perceived by some as over spaced and of low appeal to shoppers, retailers and ultimately investors. However, this view fails to recognise that even in places with surplus retail stock, there are still areas which are both important to shoppers and successful for retailers.
As around 46 per cent of the UK’s 1,400 shopping centres are classed as secondary, they remain a very significant part of the overall market. With varying degrees of quality and performance, how do we spot the winners?
The most successful secondary locations recognise that fitting their offer to the needs of the local catchment is fundamental to performance. They acknowledge competition and seek to provide a point of difference. Shopping centres that adopt this ‘fit to catchment’ approach will generally see an uptick in footfall and retailer demand. In town centres this approach means thinking beyond retail to include social and public realm spaces, health and services, community and civic uses.
Secondary shopping centres must also pay particular attention to their leisure offer. Restaurants are not necessarily the answer in all locations, for example those where the core customer is focussed on convenience retail. In community shopping centres, where the key focus is on value and convenience, the average spend on food and beverage is around £7.50, pointing to demand for cafés and takeaways rather than a full dining offer.
Tenant profitability is also a key factor in creating sustainable retail locations. In both secondary and community shopping centres, sales densities do not tend to reach the levels of more premium destinations, but the favourable occupational costs can compensate by delivering a robust profit margin for retailers. In turn, strong occupational performance provides income security, making those centres attractive to investors.
The last decade has seen some retailers consolidate their store portfolios while others have grown them, and successful retail schemes have become more in tune with what both brands and consumers want. Further evolution of physical retail space is inevitable as the role of online shopping continues to change against the backdrop of the current political and economic uncertainty in the UK. This could well have a positive result for community shopping centres, if tightening of purse strings sees shoppers increase their reliance on local, affordable retail offers.
Across the board, shopping centres and high streets that have adapted their offer to meet consumer and retailer needs, while reducing occupancy costs to affordable levels, are well placed to continue performing robustly and remain attractive to shoppers and investors alike.
Read more: Retail Revolutions