The recent turmoil at Gap in North America provides a few interesting lessons for retail landlords across Europe and the UK.
For those who may have missed it, the company recently announced it would be closing a further 175 stores in North America, the latest in a wave of closures that has landlords bracing themselves.
The feeling is an all too familiar one for many landlords that have worked their way through year after year of retailer insolvencies since the financial crisis.
That said, this feels different. The prospect of Gap willingly closing up a profitable location and leaving forever has to sting a lot more than getting back a unit vacated by a video rental chain.
For decades, Gap has been synonymous with mall retail and its stores have anchored prime positions in many retail destinations. Retailers tend to move in herds and the loss of a quasi blue-chip tenant like Gap could be fatal.
The fate of many assets now hinges on the decisions that major retailers like Gap are making about the importance of a given location’s audience to the retailers’ strategy. The locations that will suffer will be the ones that have lost their relevance to consumers.
Gap has, in many ways, lost relevance and suffered a similar fate. In its home market and across the world, the likes of H&M, Zara and Uniqlo have stolen a huge share of the consumer’s wallet for basics.
Many blame this on Gap’s failure to keep up with the fast-fashion strategies employed by its competitors, which are capable of getting product from the runways to the shelves three times faster than Gap. New products are delivered to H&M stores on a daily basis. The shelves of Zara are in a constant state of churn to ensure that the shopper experience is never predictable.
Gap became static and fell behind. Competing retailers that could provide a more interesting and ever-changing offer outperformed it.
The same trends taking place inside competing stores are taking place on a larger scale between competing retail destinations.
Owners of malls, large estates and high-street promenades are making space for food and leisure to encourage dwell and provide “a day out”. They would be wise to take a lesson from the fast-fashion retailers and ensure the mix of experiences and brands they are providing is one that changes at a fast enough pace to stay relevant to consumers.
Many are adopting this approach by setting aside a portion of their portfolio for shorter lease terms. We have found that some of the most forward-thinking retail landlords in this regard are the large estates like Sloane Stanley, whose shops along the Kings Road, SW3, offer a healthy mix of longer-term anchors alongside a steady stream of fresh concepts.
It is interesting to see that the owners most clearly focused on long-term value creation are adopting the fast-fashion approach and recognising that both consumers and retailers move in herds, and often in that order.
Peter Lennon, landlord partnerships, Appear Here
