A president for turbulent times
Published: 16 February, 2011
Richard Akers has taken over as president of the retail property trade body BCSC, and his year in office comes at an especially challenging time for his main role, as managing director of the retail portfolio at Land Securities.
Akers joined Land Securities in 1995 and served as head of retail portfolio management before becoming a main board director in 2005. Like all retail landlords, Land Securities was hard hit by the recession. But now it has steadied the ship and finds itself with sufficient free cash to re-enter the investment market, buying a stake in Westgate in Oxford, the 02 centre on London’s Finchley Road and the Overgate centre in Dundee.
And uniquely among the major REITs, Land Securities is building retail space again: last year it went back on site on the million-sq ft Trinity Leeds project, and this year it expects to start construction on the Atlas site in Buchanan Street, Glasgow.
But Akers is under no illusions that this marks a return to business as usual. “The supply/demand balance has shifted,” he says. “That’s partly because of the internet, and partly because of the overhang of vacant space.”
As a result, landlords have had to change the way they operate. “We’ve had to become more demand-led, more solutions-led,” Akers says. As an example, he points to Land Securities’ relationship with the John Lewis Partnership. “We worked with them for four or five months on the ‘at Home’ format before they decided to open on our retail park in Poole. And we’ve since agreed the first city centre location in Exeter.
“And we’ve now got five new stores on the go for Primark,” he adds. “They’re on Oxford Street, in Livingston and Sunderland, and there are two more we haven’t announced yet.”
Similar forces will be shaping the BCSC agenda this year. “We’ve already held a joint seminar with the Investment Property Forum to explore the implications,” says Akers. “The big challenge is how can we encourage more sharing of turnover information – it’s crucial in determining whether or not a location’s working.”
And he warns: “It’s fine to insist on it when leasing a new scheme, but what about the older stock? They’re the ones most at risk.”
To sum up the new approach, he says: “Owners need to manage spaces more proactively.” And within the Land Securities portfolio he has found a potential role model: the outlet mall.
“Centres like Gunwharf and Bicester Village have been phenomenally successful,” he says. “Sales densities in the best outlets are as good as in out-of-town centres.”
And the reason for that success, Akers believes, is the potential for active management. “At Gunwharf we churn 12 retailers a year. You couldn’t do that with conventional leases.”
He asserts that new leases will have to be outside the constraints of the 1954 Landlord & Tenant Act, which guarantees tenants security of tenure, and uses comparables from other lettings to assess the rent payable. “In an outlet you can let to whomsoever you want, at whatever rent you want, and it doesn’t affect anyone else,” he says.
Equally, the BCSC wants to see government acting to free up the development process. “Tax Increment Funding is essential to kickstart regeneration for the benefit of the wider community,” he says. BCSC is lobbying for one particular variant of TIF – the Local Tax Reinvestment Programme or LTRIP – because it could be implemented without the need for primary legislation.
Another issue that needs to be addressed urgently, according to Akers, is the mass of secondary shopping centres across the country. “There are specific risks but also opportunities,” he says. “These need to be understood by lenders, valuers and borrowers so we’re producing a guide to asset pricing and valuation. “
In particular, he says the market “needs to analyse the capital investment requirements for these centres.” And he points out that valuation methods struggle to cope with depreciation, which is a very real threat to older centres.
“There’s also the issue of exposure to lease expiries,” he says. “It’s not a problem if those retailers are performing: in the end values are more underpinned by retailer performance than they are by lease structures.”
