As voids increase, retail parks are having to accept a wider range of tenants from some unlikely sources. Laura Lupton looks at how landlords’ need to fill space is changing the retail landscape.
Last month The Range owner Chris Dawson snapped up MFI’s old stock for what would have no doubt been a bargain. That he was able to do this is a sign of the times. That he has managed to take some of the retailer’s old stores to sell it out of is perhaps even more telling.
In previous years, having a make-shift brand trading on a retail park might have been something landlords avoided, but with things as tight as they are self-styled real-life Del Boy Dawson has been welcomed by some remarkably open arms.
The reason is simple: landlords on out-of-town retail parks are having a hard time. Stagnation in the housing market has led to shoppers cutting back on the big-ticket purchases traditionally linked to moving house and this has hit the bulky goods sector hard.
Over the past year, big-name retailers such as MFI, Land of Leather and Rosebys have gone into administration, leaving a large number of voids on retail parks. As Dawson’s ingenuity selling on MFI stock highlights, there are clearly opportunities for retailers on the horizon, but what does this all mean for the future of the sector and how will tenant mix change?
With more voids there is increasing desperation to sign new tenants at all costs. Jones Lang LaSalle director Fiona Zeitlyn thinks tenant mix will suffer to some degree. “There are not many tenants out there at the moment for landlords to pick from to get a range of goods so they will take what they can get.”
The rate at which voids are increasing on retail parks has got many landlords nervous and with the end of the relief on empty property rates last year they are now doubly worried because of the increased charges that they have to cover if a unit on their park is void.
So for a landlord, especially one that has had a void on its park for a long period, a temporary retailer is now a good prospect.
CBRE head of UK out-of-town retail Nikki Skelton says: “There are certain incidences where landlords will let on a temporary or short-term basis to mitigate the significant cost of voids.”
While a viable tactic for a landlord is to look to a temporary retailer to cover the rents and service charges while they look for a more permanent retailer, in doing so they have to be wary to assess the possible risk to the scheme and ensure that it will not have a negative long-term impact for the permanent retailers on their park.
Savills head of UK out-of-town Johnny Rowlands says: “Landlords don’t want to see the look and the presentation of the retail park go downhill, but at times like this anything to drive footfall is key.”
Even before the downturn in the market became so acute a shift in the type of retailer on parks had begun. For instance, some parks now have a higher element of traditionally high street fashion reflecting consumer demand. Skelton says: “Some landlords have done deals with regards to tenant mix such as wanting to draw Marks & Spencer and Arcadia and this has had a positive change.”
Another major shift has been the increasing presence on retail parks of supermarkets such as Aldi and Lidl. As the dire climate retail is facing shows no signs of abating, there are likely to be plenty more opportunities for similar retailers in the near future.
Landlords, eager to fill voids, are also aware of the long-term changes in the out-of-town market. As an example of how much things have moved on in some places, Prupim’s Northwich Retail Park in Cheshire (see box) now includes a Next, Peacocks, Argos and Sports World, reflecting a broader high street retail mix rather than the traditional bulky-goods format of five years ago.
So what will retail parks look like in the future? There are mixed opinions, but with the housing market looking unlikely to improve anytime soon, it seems that the bulky goods sector will inevitably shrink.
However, as Zeitlyn explains, this presents opportunities. “There will still be bulky goods retailers coming through as there is less competition, so smaller companies are seeing the opportunity to be more acquisitive,” she says.
With new brands emerging from the turmoil to take their first steps on parks temporary retailers will remain a fixture on these parks. But if these help with costs and contribute to footfall then they will continue to be necessary. The plus side is that these tough times might also present the chance for emerging start-up retailers to enter the market on relatively soft deals.
“A lot of big retailers are finding it tough and naturally a lot of landlords are braking up the units and making them smaller,” says Jessops property director Andy Bangs. “It’s given the chance for smaller players to give it a go. The days are over-numbered for these massive format stores.”
Zeitlyn also forecasts that there will be a rise in retailers that offer a wider spectrum of goods to the consumer at lower prices, such as Asda Living and Wilkinson. This sentiment is echoed by Rowlands. “There is a market out there for this and there are fantastic deals for the consumer,” he adds.
To adapt to changing demands landlords will have to reconfigure their space to suit retailers’ requirements. Many retailers no longer need to use all of the vast space a lot of retail parks have. One solution will be splitting units up for multiple retailers to have smaller units.
In the downturn, planning permission of some parks, especially those that sell primarily bulky goods, may also need to change to allow for a greater tenant mix. Easing retail park constraints would make it easier for different types of retailers to take space. As Schroders head of retail asset management Peter Cooper says: “There are many things we can achieve if we can relax planning consents.”
It might not be a comfortable shift, especially for landlords, but retail parks are being forced to evolve. There are several short-term solutions to filling voids and temporary retailers is one of them.
Prupim director of asset management for retail Tim Hayns says: “While we hope that there will be no more corporate failures we anticipate that there will almost certainly be a rise in temporary and short-term lets.”
Times are tough, no doubt, but many of the problems that have existed out of town, such as a stagnant tenant mix, are now finally being solved.
Northwich: How the tenant mix has changed
Northwich Retail Park in 2000
The Sofa Company
Tiles R Us
… and today