Land of Plenty
Published: 01 December, 2010
Land Securities is committed to remaining a force in retail property, and that means changing the way it works
With One New Change opening in the City of London and Trinity Leeds resuming work on site, Land Securities is firmly back in the business of shopping centre development. Commercial director Ronan Faherty is the man responsible for populating those schemes with tenants, and he is clear that in the new economic climate, landlords need to adopt a new approach to occupier relationships.
The shopping centre development pipeline is all but dry, but Land Securities has continued development even through the darkest days, building St David’s in Cardiff, One New Change, Park House on Oxford Street and now Trinity.
“St David’s is a good example of what you have to do today,” Faherty says. “If you’re going to do something it has to be that special, that dominant, to change consumer behaviour.”
But before starting such a scheme, the business case for development has to be researched even more meticulously than ever. “You have to do more work upfront to understand the consumer, the demographic and how they react, to justify starting a scheme,” he says. “From now on we’ll only develop when we’re 100 per cent confident.”
A similar consumer-focused approach is also informing the leasing process, according to Faherty. “Land Securities works hard with its retailers to identify the space they want to occupy – it’s about creating a platform for success,” he explains.
Although he concedes: “Sometimes that means you have to say a location’s not right for a retailer.”
And that approach applies long after the lease has been signed. “By understanding the consumer we can advise our retailers on ranging, even the sizing they put into a store. We invest in research so why shouldn’t we share it with the retailers?”
And Faherty says that through the downturn Land Securities has been changing its working practices to align them more closely with the retailers.
“We came out with monthly rents before the market, we worked with the retailers group on the ten-point plan and then we launched Clearlet.”
Introduced at the end of 2009, Clearlet offers tenants flexibility, with monthly rents in return for the disclosure of turnover information. And it is easier to obtain consent for change of use or sub-letting. The old fashioned legal jargon has been replaced with plain English and the simplified documentation means both parties benefit from lower legal costs and faster transactions.
“We found we could meet 98 per cent of the retailers’ requirements,” notes Faherty. “But the biggest problem now for retailers is the rent review process.”
He points out that property people think in terms of five, 10, 15 or even 20 years, when many retailers find it difficult to look further ahead than what’s going through the till next Saturday. “How can we align those interests?” he asks.
For Faherty, the solution lies in taking co-operation further, with owners and occupiers sharing information. “We have to treat sales data with the utmost confidence,” he says, “and retailers are obviously concerned it will be used in evidence against them at rent review but that’s simply not the case. Rent reviews are about Open Market Rental Value – it’s the last deal that was done that counts,” he points out.
“And we don’t insist on sharing information in a lease. It’s done on the basis of trust, on the basis of a relationship.”
Equally, there are other situations where more communication could benefit both parties. “The CVAs have to stop,” asserts Faherty. “The answer is to talk before it gets to that stage.”
He advises: “If there’s a problem, talk early. We will listen and there are ways we can help. And if we can’t we’ll say we can’t.”
As an example of how Land Securities can help drive sales he points to the recent student lock-in at St David’s. The centre was kept open specifically for students one evening during freshers’ week and according to Faherty some retailers achieved 70 per cent of their weekly sales target in just those three hours.
One of the biggest challenges facing the retail property sector is the growing perception among retailers that they can reach the bulk of their target audience with far fewer stores than used to be the case. Even Arcadia is now reported to be looking to shed 300 smaller sites.
“We’ll just have to make sure that the stores they have with us are the ones that perform,” says Faherty. The pressure is on us to up our game, to work with the retailers to drive sales.”
Several examples are beginning to emerge of this new way of working. Land Securities has worked with Primark to create new stores at the Bridges in Sunderland as well as at Livingston and Thanet in Kent.
And having hosted the first John Lewis at home store in Poole, Land Securities is now going to deliver two more including the first in a town centre location.
In Exeter, John Lewis will occupy 1/11 Sidwell Street which has been vacant since Land Securities’ Princesshay shopping centre opened in 2007. The store will cover 67,000 sq ft over five floors. And in Chester, the new John Lewis at home will comprise 60,000 sq ft over two floors at Land Securities’ Greyhound retail park in Sealand Road. It will be the first John Lewis at home branch in the north of England.
“Our big advantage is that Land Securities has a genuinely nationwide portfolio, and also a diverse portfolio covering shopping centres, retail parks and outlets,” explains Faherty. “We’re able to advise retailers going into a new format for the first time.”
In a similar vein, Land Securities is doing a lot of work in edge-of-town locations with foodstore partners. “We’ve formed a partnership with Sainsbury’s to look at where they want to grow and develop,” says Faherty.
“The key is to add on complementary pieces – you have to create a sense of place and to do that you have to be flexible in your thinking.”
But above all Faherty is clear that the retail development business has changed fundamentally.
“We were rolling out a million sq ft a year of new development. That’s changed for good,” he says.
“One of the things that came out of the recession is that it’s brought retailers and landlords closer together. If we ever go back to the way we were before, shame on us.”
