The continued rise in online retailing could be seen as a threat to the physical store environment. Are retail parks doing enough to adapt?

To the fainthearted, the continued rise in online retailing could be seen as a threat to the physical store environment. In fact, the Centre for Retail Research predicts online sales will rise 16.2% in 2015 to £52.25bn.

Yet, to the savvy omnichannel retailer, the store has a renewed role as a brand ambassador that is still intrinsically important to driving sales.

“Proactive landlords are being rewarded”

Chris Laverty, KPMG

For retailers and landlords alike, failure to respond to shifting consumer behaviours and aspirations comes at a heavy price and the consequences for physical retail real estate has been well documented.

Conversely, proactive landlords are being rewarded, particularly those which, through focused asset management strategies, have reinvented themselves to maintain if not improve performance.

A good example of this is retail parks, which, in contrast to the high street, have stood up remarkably well to the onslaught of internet shopping.

Retail park 2.0

The modern retail park is a far cry from its bulky goods-led predecessor, the format of which has more in common with shopping centres, often attracting clothing, homeware and other lifestyle retailers.

The imminent opening of Fat Face’s first retail park store in England at Elliott’s Field is confirmation that retailers that were once reliant on high street retailing now recognise the sales potential of ‘retail park 2.0’. 

Thus far, much of the focus has been placed on landlords to provide remedies in relation to underperforming parks, but what can retailers do for themselves?

The physical nature of real estate and the structural constraints of leases creates inertia, however, the demise of retail park stalwarts such as Comet highlight the consequences of failing to evolve. The dwindling relevance of big box-retailing has led others to review their portfolios and introduce store closure programmes.

We have seen numerous approaches to utilise now oversized retail premises, including absorbing consolidating businesses, establishing quasi-concessions and adding complimentary uses.

Inventive stores

Next appears to be one of the few retailers embracing larger units. It has successfully created more reasons for shoppers to visit with their fashion, home and garden concepts, while also introducing Costa coffee shops.

But soon retailers will need to think beyond coffee. Future incarnations of store rationalisation tactics will require retailers to become increasingly inventive in attempting to create points of difference that will set them apart from the competition.

“Parks that do not adapt are likely to become retail dinosaurs”

Chris Laverty, KPMG

And it is not just what lies beneath that is important. Form is as critical as function. We have seen examples of retailers replacing cold grey metal store frontages with fully glazed alternatives designed to create a more consumer-friendly environment.

This isn’t a problem that should be borne by the retailer alone. An unchecked decline in retail sales performance will ultimately have a negative influence on asset value and so it makes sense for landlords to co-operate with such initiatives.

Parks that do not adapt are likely to become retail dinosaurs and so now is the time for landlord and lessee to collaborate to secure the future of the retail park.

  • Chris Laverty is a partner at auditor KPMG in the UK