Hammerson plots a new course
Published: 01 September, 2010
Hammerson chief executive David Atkins is leading a radical restructuring of the company, with a pledge to put occupiers’ interests at the heart of the business
Unveiling his new strategy at a presentation to retailers in London, chief executive David Atkins explained: “When I took over at Hammerson last Autumn I took a long, hard look at the business. In the context of a very difficult property market it was clear that we’d have to do something different.”
To find out how the company was perceived, Atkins commissioned in-depth interviews with 50 retailers, from chief executive down to store manager level. And the answers did not always make comfortable reading. One described Hammerson as a “grand old dame of the property industry” and there was a widespread perception that the company was unresponsive, inflexible and set in its ways.
But the survey gave Atkins the ammunition he needed to drive through radical change. “This type of exercise is absolutely crucial to the success of our business,” he said. “As chief executive I’m committed to Hammerson getting closer to our retailers to understand their businesses and find innovative ways of working together that will add value for both of us.”
The need for change has become more urgent as the survey made it clear that retailers are nervous about the short-to-medium-term prospects for their businesses. “The economic landscape has changed,” explained Atkins. “Retailers are concerned about a triple whammy of rising unemployment, higher taxes and weak consumer confidence.”
With development activity at a standstill the only way Hammerson can grow its business is by increasing revenue from its existing properties, but that is tricky when its tenants are under pressure. “We have a shared interest to increase retail sales,” explained Atkins.
Already, tangible steps are being taken to increase the focus on driving sales in the Hammerson centres, with the appointment of Janette Bell as UK sales and marketing director. She previously held senior roles with Tesco, PriceWaterhouseCoopers and Centrica.
“I’ve set our business a very clear goal. Customers have a choice and I want Hammerson to become the best owner/manager and developer of retail space in the UK and France,” said Atkins.
Detailed implementation of the new strategy in shopping centres lies with managing director of UK retail Laurence Hutchings. He too is taking the customer survey as his guide. “The survey was enlightening and challenging,” he says. “It showed that retailers thought highly of our shopping centres and retail parks. We have to recognise that the quality of service needs to match the quality of the product.”
And one point the survey did highlight to Hutchings is that Hammerson’s centre managers and their teams are held in high regard by retailers. “The survey showed that our day-to-day centre management is a major strength. It’s the rest of us that have some catching up to do.”
The customer survey identified seven key areas where Hammerson could sharpen up its act. First was communication. “It’s about being better engaged with the customer,” says Hutchings. Second was consistency. “There’s a need for our agents to have the same values as the client.”
The retailers also called for Hammerson to become more proactive and flexible. “Recognising that retailers have different business needs and different business cycles,” is how Hutchings puts it. And tied in with this is a need for greater retailer awareness. “We have to understand their business drivers,” he said.
Speed was another sticking point. “Retailers need a quick response to key issues,” Hutchings conceded. And the final point was follow-through. “Our staff should be empowered so that when we reach agreement retailers will see the results quickly,” he said.
By driving through change to make the company stand out from the crowd of other landlords, Hutchings believes there will be a real impact on the bottom line. “At the moment we’re in an undifferentiated position, and that’s not good enough,” he explained. “Retailers have a choice today and we want to move to a best-in-class position so that retailers would rather take space in a Hammerson scheme than in any of our competitors’ centres.”
And he added: “We have a plan to deliver on these objectives. We need cultural change and we need to invest in training and developing our people so that we also think like retailers. The key point is that we need to measure our success by our customers’ success, as expressed by retail sales.”
And Hutchings said change is already taking place. “Over the past six to nine months we’ve been transforming our organisation,” he said. “We’ve been looking at our processes, our internal structure and the way we communicate with retailers.”
As part of the review, Hammerson discovered that the leasing process is one of the biggest sources of friction with retailers. “It’s about how quickly we can move from agreeing heads of terms to issuing lease documents to facilitating a retailer commencing trading,” said Hutchings. “For a retailer the key issue is: ‘How quickly can I open the store and how quickly can I start getting a return on my investment?’”
And the way Hammerson – and most of its peers – has gone about things has tended to stretch out this process. “We tended to operate in silos,” explained Hutchings. “There was a development silo, a leasing silo, an asset management silo and so on, and for our customers that’s been frustrating.”
The solution has been the appointment of portfolio directors with full responsibility for a group of assets. “They can look through the silos so we can offer a seamless service,” Hutchings promises.
The other big change has been the creation of a customer account structure. “We’ve taken the leasing team from being responsible for a group of assets – shopping centres or retail parks – to a position where they’re responsible for a group of retailers. Their job is now to understand the business of those retailers in some depth.
“Another change has been to empower our troops at the coalface. People working in our centres will be empowered to make decisions,” he asserted.
To simplify the leasing process further, Hutchings said Hammerson is looking at its standard lease, which currently runs to 80 pages, to make it shorter and simpler to understand.
But does that mean a move towards monthly rent payments and away from upwards-only rent reviews? Probably not. “We’ve embraced the BRC/BPF agreement to offer monthly rent payments to support smaller retailers and those under financial duress” is as far as Hutchings will go right now.
But he said: “In a wider sense we think there’s an opportunity to revise the contractual side of our business and that could include payment frequency, the review process and the automatic right of renewal. We just think there needs to be a bit of give and take from both sides.”
Atkins and Hutchings have set a new course for Hammerson, but they recognise they are only at the beginning. “It’s all about delivery,” said Atkins. “We’re developing a number of key metrics like vacancy rates, sales per sq ft and productivity and these are going to be posted on our website and mailed to retailers.
“Ultimately I’ll know we’ve succeeded when retailers say: ‘We used to take space with you because it was a great location. Now we take space with you because it’s Hammerson space.’
“It’ll take a couple of years but I think in 12 months you’ll see a real difference,” forecast Atkins.
