STRUCTURAL change in our retail sector began long before the pandemic but was exacerbated by it. We all have seen the impact in our high streets and shopping centres, with vacancies blamed on online competition and rising costs.
On the other side of the fence commercial landlords have been hit hard with falling rents and highly flexible lease structures undermining income security.
While many negative stories circulate about the future of “bricks and mortar” retail, out of adversity comes opportunity and landlords know their asset management strategies have to become more creative. Knocking two smaller units into one may be the answer, but a wide range of strategies are now being used to keep units occupied and schemes attractive.
Retailer retention is critical, and lease regears, removing breaks or extending terms in return for some rent free can work for both parties, just as turnover rent models are more often accepted by landlords to secure the right tenant and drive footfall.
Bigger challenges come with major unit vacancies or even a run of empty units in a mall where the retail demand is simply no longer there. Finding a solution to such problems is critical but if a clever one can be found, it can have a far-reaching impact on the scheme. A number of local owners have done just that.
Lotus Property found letting The Junction outlet scheme in Antrim challenging – it was too just too big. They have just delivered a new unconventional anchor for the scheme in Dobbies garden centre, a £10 million investment and a 110,000 sq ft letting.
Dobbies will be a footfall generator and as the letting takes out a significant number of mall units, it also serves to “right size” the rest of the scheme to match the real market demand.
A more typical retail solution was found in securing Primark in the former Debenhams space in Rushmere (30,800 sq ft) and in the £7m investment in Fairhill, Ballymena (26,100 sq ft unit). Both schemes and their existing tenants will expect to benefit materially from the new Primark footfall.
In a more “left field” solution, £4.5m was invested in an eight-screen Omniplex cinema in The Boulevard in Banbridge a few years ago taking out a vacant stretch of units – and it proved to be one of the catalysts for Lotus Property’s material improvement of the scheme.
A recent Omniplex investment in The Avenue Cinema (in the former Debenhams space in Castlecourt) is another unconventional solution to a tricky retail problem. The new 28,000 sq ft, £5m project opened in March and provides nine 60-seater luxury auditoriums that don’t just improve Castlecourt, but also the city centre’s leisure and hospitality offer.
The protagonists in our retail market continue to find inventive solutions to specific problems to keep their schemes attractive to customers – but the ultimate issue for the sector will be the oversupply of dated space in the market.
It is inevitable that tenant demand will become focussed on the more desirable schemes and owners of secondary schemes will need to rethink their strategies to keep up.
:: Gareth Johnston is managing director at Lisney