Justin Taylor, Head of EMEA Retail, discusses structural change in the retail sector and what’s next.
What is so interesting, is when we talk to clients and colleagues in the Americas, Asia and Australia, many of the trends we are seeing in Europe are replicated in those markets. There is a convergence of societal trends, such as more people living in large urban centres at increased density, with digital trends which are causing an unbundling of the retail value chain, meaning a shop’s original purpose as a place for transactions and distribution of goods in some cases is weakening.
The consequence of this convergence will mean existing assets will need to be repurposed and transformed and new urban places will need to be more relevant, vibrant, and engaging to customers and communities.
The real estate agenda is moving steadily away from a singular focus on retail mix towards how many uses can work together for mutual benefits. There is growing recognition that the physical lines which once rigidly separated the functions of living, working, entertainment and shopping need to be almost entirely removed.
How well urban locations adjust to the changes already and irreversibly underway, will be defined partly by how they respond to that most fundamental of human drivers: the desire and/or need of people to be in a certain place and to capture that “instagramable” moment with colleagues, family and friends.
As the “armchair economy” (everything available on digital request) trend grows we are also witnessing counter-lifestyle trends emerging. These include the need for belonging, health and wellbeing and a desire for visitor attractions/experiences. The behavioural drivers for customers in the future will be an experience which delivers ‘pleasure’ and ‘purpose’ and these need to be core to the offer of a physical place. We see great examples of this on projects Cushman & Wakefield are working on, such as Wembley Park in London, a £3bn development being undertaken by Quintain, creating a new 85 acre neighbourhood.
To reflect these changing global trends and how they will impact real estate, at Cushman & Wakefield we are moving away from historic property sector definitions of retail, offices, residential towards a language which reflects customers’ missions and emotions. We envisage these future mixed-use destinations being termed “Social Spaces”; better reflecting the underlying human purpose and emotion. We are seeing similar trends in the office and co-working sector where increasingly the employer needs to locate where the talent pool lives and is available. The employee is increasingly looking for a more vibrant, engaging and changing place to live and work. Our team has worked with Argent on the development of Kings Cross in London which exemplifies these trends. Kings Cross is responding to the mix of people and culture accommodating students, office workers, visitors, tourists, shoppers and residents. The world-famous arts college Central Saint Martins, sits alongside office occupiers including Google and soon-to-be Facebook, with the centre piece being a huge public space with fountains (Granary Square) and canal-side restaurants and events space.
There are further projects we are working on which illustrate these trends.
In Scotland, Edinburgh St James is a multi-level mixed use city centre development with integrated transport combining entertainment, residential, retail, bars and restaurants, with a W Hotel facing onto a high quality external new public square, set in a UNESCO World Heritage site.
Savarin, in the heart of Prague’s prime shopping and cultural district (between Na Příkopě street and Wenceslas square), is a 60,000 sqm mixed-use redevelopment project which will combine heritage sites with new sophisticated retail, leisure, F&B and offices to engage and grow the existing daily footfall of 150,000 people.
Bratislava’s mixed-use riverside development, Eurovea, is set to complete its second phase in 2020, which will add a further 110,000 sq m of office, retail, leisure and river-view residential space to the site, as well as extensive new infrastructure to the area (tram connection, cycles routes and proposed pedestrian footbridge over the Danube). The estimated footfall will be over 15m visitors per year.
The iconic Battersea Power Station in London will reopen in 2020 and on completion will include nearly 90,000 sq m of retail and leisure, a new European office headquarters for Apple, two public squares/parks, residential apartments overlooking the river Thames and a new art’otel.
The Grand Hotel Dieu in Lyon, which was the main hospital of the city for 800 years, has been redeveloped into a mixed-use site comprising retail, offices, a hotel and events space within a combination of covered arcades, courtyards, terraces and gardens.
These types of locations will be increasingly important for retail and manufacturing occupiers as the purpose of a shop transitions increasingly to a place for brand engagement, product awareness, intention to buy and aftersales service, rather than simply transactions. In turn, this is likely to lead to a need for a different or variable rental/income model which better reflects the value of a store to both owner and occupier. To achieve this, there will need to be more alignment of interest between the owner and occupier where there is shared risk and reward, based around the success of the physical asset.
As we look at the future, we see a positive trajectory for retail in a changing world. For the ‘right retail space in the right location’, when organised with high-quality public realm and with an appropriate mix of other uses, these locations will be a magnate as social spaces. This is because it will deliver pleasure and purpose to the user and create the places where people want to spend their time. As we all know, time is the most precious of commodities and it is our choice how and where we spend it.
Justin Taylor is Head of EMEA Retail, who provides ongoing consultancy and agency support to retailers and landlords alike, across many of the most exciting projects in Europe.
Justin’s driving force at all times is “the future of retail” and how this affects the Retail Property industry, using his expertise to help create future-proof developments and encouraging clients to stretch, grow and evolve in line with social, economic and technological changes in the market.