Are Small Retailers Becoming an Endangered Species?

Cecil_the_lion_in__3388298bThe illegal killing of Cecil the lion has generated many column inches about the protection of endangered species. In an admittedly tangential intellectual leap, I’ve been wondering if we should be adding another dying breed to the danger list – that of the independent retailer.

It seems that just like many animal populations in the wild, retailers who colonise once abandoned areas and make them fruitful again, tend to attract the unwanted attention of bigger game looking for an easy kill.

Currently the country’s richest landowner, the Duke of Westminster is planning to bulldoze a chunk of the Pimlico Road, regardless of the fact that he’ll be rolling the heavy machinery over a raft of long established and successful independent stores.

Unfortunately for them, it’s not enough that the property is earning more than it’s keep and probably appreciating faster than Tracy Emin’s unwashed bed socks. The assets must be sweated, even though they’re already soaked in years of perspiration, squeezed from the brows of those who’s businesses trade from them.

Passport to Pimlico

The Pimlico Road has become a magnet for interior designers and anyone looking for something a little out of the ordinary. The antithesis of what chain stores provide, by their very nature. Yet buoyed, no doubt, by the increased footfall these niche stores have inspired, Grosvenor’s plans are reportedly to develop gargantuan retail units that they believe will be more attractive to larger international brands.


Developers now fish in a gene pool that is becoming progressively more shallow, producing a retail mono-culture where they no longer understand or apparently care about the requirements for smaller operators, except as pop-ups of convenience or a bit of garnish to their main offer, usually in the form of RMUs.


And this isn’t an isolated case. We’ve seen similar changes in character to destinations such as Burlington Arcade, Spitalfeilds and Covent Garden. In central London, galleries in Cork Street and Dover Street have been lost, and even bespoke menswear stores and tailor’s workshops that gave streets like Savile Row their iconic status around the world have been ground under the developer’s heel. While London may be the vanguard for these culls at the moment, it’s a strategy that’s starting to gain ground, literally, around the whole of the UK.

When I entered the high street over 20 years ago, I remember even the most hard nosed property managers being supportive of smaller operators. Not only did they appreciate your staying power, but they saw your business as providing that extra spark and diversity that kept their developments attractive to both consumers and prospective tenants.

Retail SSI

There now seems only to be a headlong pitch towards bigger, brasher and more expensive spaces with scant regard for anything a smaller retailer, let alone a start-up, could occupy. New malls for example now rarely offer spaces small or affordable enough for indies to even contemplate.

Developers now fish in a gene pool that is becoming progressively more shallow, producing a retail mono-culture where they no longer understand or apparently care about the requirements for smaller operators, except as pop-ups of convenience or a bit of garnish to their main offer, usually in the form of RMUs.

protected-species-sign-on-gate-postSo where does that leave the small retailer of the future? If every time a secondary or tertiary location is popularised that’s taken as a cue to erase their existence, where will innovation and verve come from on the high street? Certainly not from the ‘me too’ generation of international brands, over-hyped and over here, rolling out virtually the same products and service models as every other chain store.

Perhaps in the same way that sites of special scientific interest are protected by government statute, we should have sites of special retail interest, where smaller businesses can be shielded from the worst excesses of re-development.And this isn’t just starry eyed idealism. Without space for new entrants into the retail landscape, where will our chain stores and national retailers of the future come from? We can’t expect every successful online business to have a yen for a more physical presence.

In the same way that vulnerable animals need to be protected from the sophisticated firepower of modern hunters, business innovation needs space to breed and expand, outside of what is rapidly becoming a very one sided fight.

Most conservationists will tell you that habitat erosion is one of the largest causes of extinction events. Maybe the world of retail property management also needs to learn that lesson before it’s too late.

This article was also published as one of my regular columns for Retail Week Magazine

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Unrealistic Rents Are Risking The Future Of Our High Streets

high-rentThe British Retail Consortium warned recently that a failure to deal with our broken business rates system could have a devastating impact on our economy.

In a stark prediction to the Chancellor, they estimated that up to 80,000 shops could fall empty over the next 2 years, putting 800,000 jobs at risk.

This is based on the assumption that 60% of stores facing lease renewals over the next 2 years may simply walk away from what has become an unsustainable commercial property model in the face of climbing rents and falling sales.

I’ve previously highlighted the perfect storm that is brewing up towards the end of 2015, with 40-50% of commercial leases falling due to for renewal.

The BRC’s predictions may be pessimistic, but there’s every reason to believe that a huge dent could be put in the retail economy very soon. This is especially worrying, considering consumer spending and the associated debt shift to private borrowing is what appears to underpin much of George Osborne’s plans for our economy over the next few years. Likewise many local authorities now rely more heavily on business rates as cuts in central government funding bite even deeper.

I’ve often been critical of the BRC. I see them as an organisation geared heavily towards protecting the big boys in the retail hierarchy, with only the odd glance back down the ladder towards small independents and medium sized chains. But on this occasion I’m in complete agreement with them, although for slightly different reasons.

Rates Burden

Business rates are of course a huge burden on high street operators and an issue that urgently needs to be addressed by the Chancellor – indeed it’s something I rarely tire of saying myself. But this has been the case for at least the last 10 years now.

However all this is largely irrelevant to the overall problem. The main reason why many store leases may lapse at the end of this year has less to do with rates and more to do with the ridiculously out of kilter valuations of the properties themselves.

It’s often conveniently forgotten that business rates are based on historic rent agreements. Many of them made by companies financed by the very same people who also bankroll mall developers and institutional landlords, both of whom have a vested interest in keeping rental expectations unrealistically high.

The driving force behind our inflated rating valuations are the equally avaricious demands by landlords who would rather see a store empty than see it’s theoretical value fall.

Bluff And Deception

Anyone who has had experience of lease renewals over the last 5 or 6 years will tell you that there’s very little sign of pragmatism from landlords or property advisers. Any hopes of the market being reset after the financial crash have long been abandoned.

This is partly down to the way that commercial property has become the vehicle of choice for the disconnected behemoths that are multi-national investment funds, but mainly because most such organisations are hip-deep in the same quagmire of over-leveraged debt that led to the spectacular economic swan dive we all witnessed a few short years ago.

robinson-bluff_1971637b

There has long been a fragile framework of bluff and deception underlying the retail property market. More than any other commercial property transaction, store leases and rents are teetering on the edge of an abyss created by property advisers and fund managers who simply refuse to give any quarter to such mundanities as fiscal viability or long term tenant relationships.

The general principle seems to be that as long as they can keep the music playing, no one ever has to count the empty seats. The problem now of course is that a raft of impending lease expiries means there may soon be a lot more chairs and a lot less people willing to play the game.


The driving force behind our inflated rating valuations are the equally avaricious demands by landlords who would rather see a store empty than see it’s theoretical value fall.


There was nothing tangible in the recent budget about business rates reform, and that’s something that we must continue to demand from a government that has been consistently phlegmatic about, despite promises of action.  But that’s now only half the story. Without effective commercial rent and lease control, or some voluntary injection of common sense into the equation, these other costs will simply expand to fill the vacuum created by any reduction in the rates bill.

If we’re going to avoid thousands more empty stores and hundreds of thousand of lost jobs, we need a comprehensive review of the entire bricks and mortar proposition. In the meantime property taxation will only be a part of any retailers decision to stay or walk away.