The Rent Review Specialist
The Future for Secondary Shops
01/12/1984
The historic development of shopping centres makes fascinating reading. Originally, as people went to market, so came permanent shops. In the post-war housing boom, shops started going to the people and even today, new council housing estates boast a block of shops.
The radical change in socio-economic patterns, and the real decline in the cost of transport, means that today, people go to the shops and the goodwill generated by the major operators in all sectors of the retailing market is sufficiently established to influence the prosperity of shopping centres.
When the idea of Brent Cross Shopping Centre was conceived in 1959, it would probably not have been anything like as successful a concept that it is today. In the early 1960' s, shopping development was confined to traditional shopping centres, and precincts, such as the Arndale Centres, were built on land fronting the High Streets. The first suggestion that people might be persuaded to shop away from the traditional pitches was introduced when the·second-generation food supermarkets, such as Tesco and Sainsburys started to move to fringe positions so as to provide on-site parking and loading facilities for their customers.
The need for food is the common link between all people. As it is a perishable product, with people having limited facilities for bulk storage, shopping for food is the main reason why most shopping centres attract daily pedestrian flow. If you take away the food shops, technically known as convenience traders, you also remove the spin-off for durable and service traders.
It is clear that the future of food retailing lies in the free-standing purpose-built supermarket located in an accessible position and offering excellent parking and loading facilities. The strength of buying power for and competition between the major operators means that retail prices are particularly keen. The independent grocer has seen his market share decline gradually since the 1950s and butchers, greengrocers, off-licences, fishmongers have all been hit hard. The ubiquitous confectioner, tobacconist, newsagent only survives because the major wholesalers of newspapers operate retail CTN outlets themselves. The private retailer with expansion ambition knows that the future for retailing must be to take units in busy positions, which are not completely dependent upon the whims and loyalties of local custom.
The importance that the presence of a food supermarket has on shopping positions is still underestimated. The closure by the Co-Op of many neighbourhood supermarkets has had a devastating effect on many local centres. Like cigarette brands, people are loyal to their favourite supermarket group and even if the old 'Tesco' is replaced by an individual grocer, offering the cliches of personal service and flexible opening hours, the damage is done. Local grocers won't survive for ever on people buying a pound of butter at 10 pm. The key to establishing some hold on the market is to contain costs, as there is always scope to participate in automatic local potential, especially as not everyone wants to shop at a superstore. In fact, the major groups are generally pleased that corner and local shops continue because they operate in different markets and, of course, it would be political suicide to admit to their extinction. However, the products are still the same and most shoppers are price conscious.
The top supermarket operators invest in research. They plan well-ahead and commitment to a development programme involving millions of pounds allows for the short term hurdles in favour of long term success. In the same way that the institutional and major landlords are actively selling secondary shops, so the major and multiple groups are actively vacating obsolete trading positions.
Apart from the food groups, the other' enemies within' (so far as the secondary market is concerned) are the DIY, furniture and electrical groups, such as MFI, Harris Queensway, Payless, Texas Homecare, Do-It-All, Comet, B & Q, Homebase, etc, etc. Clamour for revision of the Sunday trading laws adds fuel to a fire which has already devastated the small retailer and is now creeping into the entire secondary centre. This year's CBI-FT figures for Christmas trading predictions mention the local shop's expectations, for the first time. Any trip around secondary shopping centres this year would have indicated the noticeable absence of extra pedestrian flow. In my opinion, 1984's Christmas trading period will mark the beginning of the secondary trader's dread of this traditional time. In the past, all shopkeepers used to look forward to the seasonal upturn, but the rot started last year when shoppers spent a fortune in the High Streets and superstores and this year will prove no exception.
Supporters of the relaxation in Sunday trading laws claim more consumer choice and new jobs. But it is blatantly obvious that the small retailer will be squeezed out by the major operators. Important shopping areas, like Oxford Street, will benefit but the axe will fall on the rest. The new growth area for unemployed will be the self-employed retailer whose business is totally dependent upon pedestrian flow generated by the goodwill of others. Few local retailers actively market their stock; they are inter-dependent upon the collective benefit generated by being in a successful shopping cen tre and without the presence of national companies, generating national advertising and goodwill, there will be little incentive for local people to shop, except for the occasional item.
The future for the secondary shop will rest upon the retailer's personal ability as a retailer, highlighting the fact that few shop-keepers are retailers. The double glazing showrooms are a good example of a modern approach to retailing. They are shops for the visible storage of goods sold by the operator, through advertising and direct marketing. Too many shopkeepers have become complacent; they are used to people walking in automatically instead of actively attracting their interest. If secondary centres do become the equivalent to an overcoat for shoppers - only needed when absolutely necessary - then the future expectations for investment growth must be limited.
In establishing the future importance of a secondary centre, close attention should be paid to the size of the premises occupied by the supermarket operator to ensure it meets modern requirements and also upon the identity of the operator, as this defines the nature of the catchment area. It is important to monitor the locations in which the major operators take sites for their new stores. Most pop up in local and secondary areas because that is where land is most available. The benefit to the surrounding centres, however, will be dependent upon each individual retailer's ability to capitalise on the presence of the extra pedestrian flow by gearing his corporate image to the needs of the people.
Landlords have a role to play in maintaining the balance of trade in a secondary centre. On receipt of applications to change the user, the landlord should refuse consent if the proposed user appears to be in direct competition with established traders.
It comes as a shock to many individual shopkeepers to be told that the rent for the premises is not calculated by reference to their ability to pay it. The level of rents in many secondary centres has already reached a peak at which, combined with the effect of rates, ever increasing overheads and declining revenue, they are now seriously affecting the stability of the centre.
Careful choice for investment is fast becoming essential. There will always be opportunities for growth, but a blanket assumption that all secondary areas will continue to prosper is a fallacy. I predict that investors who expect the percentage increases in rents applicable in the five year period from 1979 to 1984 to be repeated for the latter part of this decade are likely to be very disappointed despite the
The radical change in socio-economic patterns, and the real decline in the cost of transport, means that today, people go to the shops and the goodwill generated by the major operators in all sectors of the retailing market is sufficiently established to influence the prosperity of shopping centres.
When the idea of Brent Cross Shopping Centre was conceived in 1959, it would probably not have been anything like as successful a concept that it is today. In the early 1960' s, shopping development was confined to traditional shopping centres, and precincts, such as the Arndale Centres, were built on land fronting the High Streets. The first suggestion that people might be persuaded to shop away from the traditional pitches was introduced when the·second-generation food supermarkets, such as Tesco and Sainsburys started to move to fringe positions so as to provide on-site parking and loading facilities for their customers.
The need for food is the common link between all people. As it is a perishable product, with people having limited facilities for bulk storage, shopping for food is the main reason why most shopping centres attract daily pedestrian flow. If you take away the food shops, technically known as convenience traders, you also remove the spin-off for durable and service traders.
It is clear that the future of food retailing lies in the free-standing purpose-built supermarket located in an accessible position and offering excellent parking and loading facilities. The strength of buying power for and competition between the major operators means that retail prices are particularly keen. The independent grocer has seen his market share decline gradually since the 1950s and butchers, greengrocers, off-licences, fishmongers have all been hit hard. The ubiquitous confectioner, tobacconist, newsagent only survives because the major wholesalers of newspapers operate retail CTN outlets themselves. The private retailer with expansion ambition knows that the future for retailing must be to take units in busy positions, which are not completely dependent upon the whims and loyalties of local custom.
The importance that the presence of a food supermarket has on shopping positions is still underestimated. The closure by the Co-Op of many neighbourhood supermarkets has had a devastating effect on many local centres. Like cigarette brands, people are loyal to their favourite supermarket group and even if the old 'Tesco' is replaced by an individual grocer, offering the cliches of personal service and flexible opening hours, the damage is done. Local grocers won't survive for ever on people buying a pound of butter at 10 pm. The key to establishing some hold on the market is to contain costs, as there is always scope to participate in automatic local potential, especially as not everyone wants to shop at a superstore. In fact, the major groups are generally pleased that corner and local shops continue because they operate in different markets and, of course, it would be political suicide to admit to their extinction. However, the products are still the same and most shoppers are price conscious.
The top supermarket operators invest in research. They plan well-ahead and commitment to a development programme involving millions of pounds allows for the short term hurdles in favour of long term success. In the same way that the institutional and major landlords are actively selling secondary shops, so the major and multiple groups are actively vacating obsolete trading positions.
Apart from the food groups, the other' enemies within' (so far as the secondary market is concerned) are the DIY, furniture and electrical groups, such as MFI, Harris Queensway, Payless, Texas Homecare, Do-It-All, Comet, B & Q, Homebase, etc, etc. Clamour for revision of the Sunday trading laws adds fuel to a fire which has already devastated the small retailer and is now creeping into the entire secondary centre. This year's CBI-FT figures for Christmas trading predictions mention the local shop's expectations, for the first time. Any trip around secondary shopping centres this year would have indicated the noticeable absence of extra pedestrian flow. In my opinion, 1984's Christmas trading period will mark the beginning of the secondary trader's dread of this traditional time. In the past, all shopkeepers used to look forward to the seasonal upturn, but the rot started last year when shoppers spent a fortune in the High Streets and superstores and this year will prove no exception.
Supporters of the relaxation in Sunday trading laws claim more consumer choice and new jobs. But it is blatantly obvious that the small retailer will be squeezed out by the major operators. Important shopping areas, like Oxford Street, will benefit but the axe will fall on the rest. The new growth area for unemployed will be the self-employed retailer whose business is totally dependent upon pedestrian flow generated by the goodwill of others. Few local retailers actively market their stock; they are inter-dependent upon the collective benefit generated by being in a successful shopping cen tre and without the presence of national companies, generating national advertising and goodwill, there will be little incentive for local people to shop, except for the occasional item.
The future for the secondary shop will rest upon the retailer's personal ability as a retailer, highlighting the fact that few shop-keepers are retailers. The double glazing showrooms are a good example of a modern approach to retailing. They are shops for the visible storage of goods sold by the operator, through advertising and direct marketing. Too many shopkeepers have become complacent; they are used to people walking in automatically instead of actively attracting their interest. If secondary centres do become the equivalent to an overcoat for shoppers - only needed when absolutely necessary - then the future expectations for investment growth must be limited.
In establishing the future importance of a secondary centre, close attention should be paid to the size of the premises occupied by the supermarket operator to ensure it meets modern requirements and also upon the identity of the operator, as this defines the nature of the catchment area. It is important to monitor the locations in which the major operators take sites for their new stores. Most pop up in local and secondary areas because that is where land is most available. The benefit to the surrounding centres, however, will be dependent upon each individual retailer's ability to capitalise on the presence of the extra pedestrian flow by gearing his corporate image to the needs of the people.
Landlords have a role to play in maintaining the balance of trade in a secondary centre. On receipt of applications to change the user, the landlord should refuse consent if the proposed user appears to be in direct competition with established traders.
It comes as a shock to many individual shopkeepers to be told that the rent for the premises is not calculated by reference to their ability to pay it. The level of rents in many secondary centres has already reached a peak at which, combined with the effect of rates, ever increasing overheads and declining revenue, they are now seriously affecting the stability of the centre.
Careful choice for investment is fast becoming essential. There will always be opportunities for growth, but a blanket assumption that all secondary areas will continue to prosper is a fallacy. I predict that investors who expect the percentage increases in rents applicable in the five year period from 1979 to 1984 to be repeated for the latter part of this decade are likely to be very disappointed despite the
Research or Gut Feeling
01/09/1984
In an increasingly complex economy, research is rapidly intruding upon the traditional province of the valuer: gut feeling. The mixing bowl, into which statistics, 'informed' opInIons, records of past transactions and trends are all technically blended, creates a science out of prediction. An objective appraisal from a source with influential but vested interests is a real test for objectivity.
Of Chartered Pension Fund cynicism, as long as they able to back Surveyors, Hugh Jenkins of the National Coal Board said " (they) will be continue to be regarded with far as their professional capabilities are concerned, as cling to gut feeling about growth prospects without being them up with fundamental research."
It is an integral feature of professionalism that the combination of knowledge and experience inevitably prejudices optimism, except in cases of absolute certainty. Research minimises risk so that while short term deals may be lost, the long term brings substantial reward. As the private investor generally operates in the short term, the limitations imposed by research contradict investment philosophy.
Will research avoid future problems? If you have to spend money, you are going to become increasingly frustrated if your adviser's research tells you not to buy, when all about you, other funds are clearly active. This does not make the advice wrong, as waiting is a very patient game. Gut-feeling is an essential ingredient in the evaluation of research. When I suggested, in the first issue of QC, that the modern concept of professionalism removes initiative, several advisers on motivation and corporate strategy agreed with me. It's what makes sense at the time and you can only draw conclusions from information if you are able to adopt a broad view. It is not the result of research which provides a span of information, but the questions that gut-feelings invite you to ask.
The danger with published research, particularly when originating from a source actively participating in the market, is that the media picks upon the conclusions, which make news, without giving sufficient attention to the data. The effect is to institutionalise generalisations. Loose mention that secondary shop rents have grown at 9% per annum over the past 5 years, combined with the prediction that rents will rise 7% per annum above inflation up to May 1985 and 3% per annum in real terms thereafter is inviting inexperienced investors to assume that it is applicable to all secondary areas. The effect of predictions of this nature will be to force secondary yields even further lower and many retailers, in secondary positions, will be unable to reconcile actual profitability with expectations of their landlords. If major firms intend to use research for public relations, they must also recognise the harm they can do to the relationship between landlord and tenant.
Of Chartered Pension Fund cynicism, as long as they able to back Surveyors, Hugh Jenkins of the National Coal Board said " (they) will be continue to be regarded with far as their professional capabilities are concerned, as cling to gut feeling about growth prospects without being them up with fundamental research."
It is an integral feature of professionalism that the combination of knowledge and experience inevitably prejudices optimism, except in cases of absolute certainty. Research minimises risk so that while short term deals may be lost, the long term brings substantial reward. As the private investor generally operates in the short term, the limitations imposed by research contradict investment philosophy.
Will research avoid future problems? If you have to spend money, you are going to become increasingly frustrated if your adviser's research tells you not to buy, when all about you, other funds are clearly active. This does not make the advice wrong, as waiting is a very patient game. Gut-feeling is an essential ingredient in the evaluation of research. When I suggested, in the first issue of QC, that the modern concept of professionalism removes initiative, several advisers on motivation and corporate strategy agreed with me. It's what makes sense at the time and you can only draw conclusions from information if you are able to adopt a broad view. It is not the result of research which provides a span of information, but the questions that gut-feelings invite you to ask.
The danger with published research, particularly when originating from a source actively participating in the market, is that the media picks upon the conclusions, which make news, without giving sufficient attention to the data. The effect is to institutionalise generalisations. Loose mention that secondary shop rents have grown at 9% per annum over the past 5 years, combined with the prediction that rents will rise 7% per annum above inflation up to May 1985 and 3% per annum in real terms thereafter is inviting inexperienced investors to assume that it is applicable to all secondary areas. The effect of predictions of this nature will be to force secondary yields even further lower and many retailers, in secondary positions, will be unable to reconcile actual profitability with expectations of their landlords. If major firms intend to use research for public relations, they must also recognise the harm they can do to the relationship between landlord and tenant.
Welcome
01/09/1984
Many people know that I am a regular contributor to the correspondence columns, so circulating a commentary of this nature to Clients must look like an ego trip to a captive audience - it has crossed my mind that you may not read it!
The objective is to keep in touch with Clients (past and present) and their legal advisers on a regular basis and to offer a commentary designed to stimulate and keep you informed of the latest developments.
As a potential forum in which to air one's views, a quarterly commentary inevitably suffers from the disadvantage that ideas can be quickly out of date so I shall not be imitating the style of others. Large agencies issue periodic reports on market trends, but most seem to concentrate upon the top end of the market and the recent discovery by Hillier Parker May & Rowden that secondary shop rents have increased at a rate of 9.2% per annum since 1979 simply enhances many people's awareness that the larger agencies, and the property media, are addicted to prime.
It is common knowledge that only relatively few advisers really understand secondary property, despite the fact that it constitutes at least 90% of the market. A noticeable absence of commercial sense amongst many assistant surveyors, working for the larger partnerships, is startling and one wonders whether the modern concept of professionalism removes initiative. Few surveyors, whom I meet in the course of negotiations, display much individuality; most appearing to act as up-market messenger boxes, shielded from their own feelings and decisions by the supervising partner. This cannot possibly benefit the Client who, in instructing a name is entitled to expect the service and attention which the reputation behind that name commands. Since I introduced the concept of specialisation into rent review valuations, there have been many imitators who unfortunately maintain the money for old rope image. Direct personal attention at partnership level on all aspects is the least that every Client deserves - he rarely gets it and strangely enough, seems prepared to accept it!
The objective is to keep in touch with Clients (past and present) and their legal advisers on a regular basis and to offer a commentary designed to stimulate and keep you informed of the latest developments.
As a potential forum in which to air one's views, a quarterly commentary inevitably suffers from the disadvantage that ideas can be quickly out of date so I shall not be imitating the style of others. Large agencies issue periodic reports on market trends, but most seem to concentrate upon the top end of the market and the recent discovery by Hillier Parker May & Rowden that secondary shop rents have increased at a rate of 9.2% per annum since 1979 simply enhances many people's awareness that the larger agencies, and the property media, are addicted to prime.
It is common knowledge that only relatively few advisers really understand secondary property, despite the fact that it constitutes at least 90% of the market. A noticeable absence of commercial sense amongst many assistant surveyors, working for the larger partnerships, is startling and one wonders whether the modern concept of professionalism removes initiative. Few surveyors, whom I meet in the course of negotiations, display much individuality; most appearing to act as up-market messenger boxes, shielded from their own feelings and decisions by the supervising partner. This cannot possibly benefit the Client who, in instructing a name is entitled to expect the service and attention which the reputation behind that name commands. Since I introduced the concept of specialisation into rent review valuations, there have been many imitators who unfortunately maintain the money for old rope image. Direct personal attention at partnership level on all aspects is the least that every Client deserves - he rarely gets it and strangely enough, seems prepared to accept it!