Last Thursday, Ellandi hosted its 8th Annual Retail Property Conference #RetailRocks19.  It is a well proven format, and a unique gathering of senior friends in listed businesses, private equity, developers, operating partners, occupiers, agents, architects, banks and significantly, this year, local authorities.   The event aims to discuss key current topics in retail property and to encourage a positive discourse around the sector (positivity being in short supply at the moment).   

Thank you to all those that took the time to attend what turned out to be an insightful afternoon, those that were unable to join, here's a short summary:  

The (Dis) United States (of the Markets)  

We kicked off with Isabelle Hease, Head of Research and Analytics talking to the room on State of the Market.  Setting the scene for the first of our panel discussions she lead us through some key insights into the retail investment landscape.  Shopping centre transactions reaching £577M and for 14 of those traded,  it was the repurposing opportunities that were the most sought after assets.  Transactions under £100m, it has been Local Authorities who have been responsible for a sizeable chunk of all Shopping centre investments so far this year. The lending market across all asset classes remains reasonably buoyant, with levels of financing issued remaining relatively similar for the last 5 years.   Looking to the equity market, while Retail property companies are offering relatively attractive dividends, the market sentiment is that this isn’t particularly sustainable given – falling rents, cap ex needs and increasing leverage. Shareholders are, understandably, much more pessimistic than fund managers, and no one really believes their NAV’s resulting in retail property companies currently trading at huge discount. In the background, bank lending pressure is increasing with borrower default more prevalent, and liquidity measures such as cash sweeps being employed.  With 78% of all outstanding debt in the market due for repayment in the next 5 years, deMontford stats shows that lenders have reduced their exposure to retail assets by 13% over the course of the last decade.    Talking about the occupier market Isabelle confirmed that there continues to be some positive headlines in certain sectors of  this market with companies showing pre tax profits and opening of additional stores. 

Concluding that, yes, people are spending their money differently – there is a clear switch from discretionary goods and “stuff”, to essential goods and services but UK consumer has held up pretty well – albeit they are now more selective.   So for retail to perform occupiers need to re imagine how they operate and the products they offer.  

Download the slide deck here     

Death to my Hometown (how bad really is it?)  

A star studded panel discussion was next on the agenda which included including experts on investment talking through some of the key topics from Izzy’s presentation:-  

• The need for sharing data and how important it is for investors, retailers, analysts to use this to inform decisions going forward
• Positive markets such as factory outlets and retail parks have been had a relatively steady performance and the increased creativity with third party management with local authorities to find further opportunities within the market
• Looking at repurposing and regeneration of shopping centres and their towns: Residential is not always the ‘silver bullet’ and we are seeing a plethora of alternative use opportunities from offices, cinemas to laboratories, film studios and other creative hubs. 
• Aviva Investors’ Barry Fowler talked through the challenges facing institutional clients trying to create an alternative products from existing assets and how much debt is available from lenders given the wider economy. Good relationships and clear business plans including transparent data from retailers opens doors to lenders according to Savills.
• Change in dynamics between retailers and landlords to include greater visibility of data for valuations  
  

Laura Hurley, MCHLG was next on stage after a short break and spoke about how the UK Government is helping the High Street with their £675 Future High Streets Fund.   The government is taking this seriously, changing policies but will need the private sector  to get behind this.  

Download her slide deck here

Lucky Town (but will anyone be paying any rent?)  

Our second impressive panel discussion got underway and discussed a broad range of topics with points of interest being:  

• Alteris’ Bert Broadhead talking about buying into the retail arena: the way retail is owned, operated and valued is ‘broken’ and this is where things start to get exciting
• Judith Evans confirmed that when the word ‘community’ is referenced in articles about shopping and town centres in Financial Times it generates a huge increase in number of readers.  Therefore homing into what the community is engaging with, tapping into not demographic segmentation but interest segmentation when looking at retail potential.
• The need to explore how other retail arenas in Hotel, Airport and Exhibition industries are successful at the moment; getting into the life of a consumer – what role does a shopping centre play in their wider life?
• What impact will shorter leases and extra costs involved in experiences in shopping centres play in investment in the future and what kind of income sources will there be?
• Getting your consumer engaged in a digital and social manner will improve productivity   Download video of the conference here  

CONCLUSION  

We are delighted that once again Retail Rocks 2019 attracted a great audience with leading industry players participating on panels and voicing their views in lively discussions from the floor. People were honest in their views, there was acceptance of the challenges currently faced by retail but also a resolve to work collaboratively and creatively to try and find solutions.

Here’s just some of the feedback:  

“Thank you very much for the invitation.  I took a lot from the discussions and presentations. A great event.” Sheffield City Council  

“Thanks all for a really good event. The line-up of speakers and panelists was excellent” Coverdale Barclay  

“Thank you so much for inviting me to what was yet another fabulously successful RR!! Really useful stuff which I thoroughly enjoyed.!” Workmann LLP  

“Many thanks for sending through the slides from the presentation last week.  I found the whole afternoon very helpful and thought provoking.” DRC Capital  

“I really enjoy the Retail Rocks events, always insightful and thought provoking. Very good panels as usual and with the retail sands shifting so rapidly, it is good to hear other people’s takes on it.”  Roche Chartered Surveyors