Something is about to reshape UK shopping centre retail. It’s big. It’s powerful. The change will be massive and irreversible.
What is this unstoppable force? Is it the internet? The food and beverage offer? No. It’s the landlord brand.
For years landlords have been transforming themselves. The days when they were simple business-to-business organisations, invisible to ordinary shoppers, are long gone. Today, shopping centre landlords are heading down a road that leads to a transformation into explicitly business-to-customer organisations whose brand is front-of-house.
Project that trend-line into the future, and the effects could be enormous; from everything that happens in shopping centres, how landlord-branded regional centres differentiate themselves from sub-regional and local offers and the mix and status of retail tenants.
According to at least one leading landlord, the effect could be to make shopping centres look like enormous department stores, unified under a single brand. And because the landlord brand will matter, needing active policing and protection, that could have serious implications for the way retailers are selected and how they behave.
Intu is probably the landlord which has gone furthest down this road. Its 17 centres are now uniformly branded, there is an Intu loyalty card and credit card, and special offers that come from Intu, not directly from the retailers. To some this is classic department-store behaviour.
Colin Flinn, regional director at Intu, explains: “The direct relationship with the customer works where the brand is strong – which is where our gift cards and apps come in. That trend will continue, we’ve been working on the brand for the last four or five years and we’ve got a think-tank working on the implications. We think we’re ahead of most landlords on branding.”
Hammerson is heading in the same direction by adding what they (wittily) call a “silent h” to the front of their individual centre branding.
Mark Bourgeois, UK managing director at Hammerson, is clear that the landlord is a lot more than just a provider of services for retailers. He says: “We absolutely need to provide the experience and convenience for shoppers, to help them explore products and facilities,” he says. “And when you look at initiatives like our hands-free shopping offer at the Oracle Reading [Hammerson looks after your bags while you enjoy yourself] it turns the shopping centre into a kind of department store.”
“This is about thinking more about delivering experience and driving footfall, and that means thinking even more like retailers.”
Unlike Intu, Hammerson is putting the centre’s local brand a little ahead of its own – but it none the less insists on its own brand values. “The Hammerson brand is visible in the logo, and that’s a mark of quality, we’re saying this shopping centre shares features with other Hammerson schemes,” Bourgeois explains.
The inevitable consequence is that landlords will want to protect their brand and its values, and as Grosvenor portfolio director Miles Dunnett makes clear, this could take the landlord-tenant relationship in some interesting directions.
Grosvenor is on Hammerson’s side when it comes to low-key branding for itself, instead promoting the brand of its Liverpool One development. The complicating factor is that Grosvenor has firm values of its own – and isn’t afraid to say so.
“Let’s be clear, if something goes wrong the first port of call is the owner of the shopping centre, and when things do go wrong it affects us – so we have to get a lot more attentive on the standards of our tenants,” says Dunnett. “Likewise, we would prefer they didn’t have things like zero-hours contracts. And yes, this relationship with tenants is going to get fiddly, and may come at a cost.”
A vision of landlords taking a keen interest in a tenant’s employment policies will come as a shock to some. But if landlord-customer relationships develop along their current trend lines, then landlord-tenant relationships will change, and this level of compatibility may become commonplace and necessary.
“The strength of loyalty to brand is important, although for us the brand is Liverpool One, not Grosvenor. Once upon a time landlords couldn’t be more passive, but today leases are getting shorter and landlords need to understand and react to the catchment population because this very rapidly has an impact on the landlord,” says Dunnett.
Intu’s Flinn seems to be thinking along similar lines. When asked what trend he’s watching for in shopping centre retail he quickly responds: “product provenance.” Once upon a (recent) time landlords would no more think of product provenance than they would of fairies at the bottom of the garden. But things have changed.
Dan Simms, head of retail agency in the South East at Colliers International, picks up on the leasing implications of landlords’ brand-led activism. He guesses that the trend to landlord-branding and stronger landlord-customer relations is probably unstoppable and potentially revolutionary.
“For today, we’ve still got landlords pointing customers back to retail branding as the route, through turnover leases, to their own income. But potentially the growth of the landlord brand has far-reaching implications for the landlord/tenant relationship. I expect those implications will be limited for the average 300,000-400,000 sq ft local centre, you would struggle there to influence the behaviour of tenants such as Sports Direct. But in the big regional centres, landlords will have a degree of influence over their retailers.”
Simms agrees that this could lead to a convergence of business models between landlords and tenants, both of whom have a direct interest in pushing turnover and protecting each other’s brands.
“You can see how landlords would want to lever something from their branding, and in those circumstances tenants become partners. To some extent they will operate like concessions in a department store.” And it is possible, says Simms, that leasing structures will adapt accordingly.
“We might see shorter leases with minimum turnover thresholds of a kind we’ve seen until now only at outlet malls. But that would have benefits for retailers, who live in a fast-moving world, and for landlords, even if it meant tenants invested less in shop fit-outs. Landlords might in any case prefer to spend the fit-out money themselves.”
“We’re absolutely not seeing this today – the 10-year lease is as firm as ever – but beneath the surface things are changing.”
A sharper branded distinction between the big regional centres and the smaller local centres, and a new approach to leasing, are just the beginning of the changes dominant landlord branding could bring.
Wellness and opportunity
The new “wellness” agenda could prove as transformational for retail as the advent of the branded landlord, according to some shopping centre gurus.
Matt Webster, head of wellbeing and futureproofing at British Land, says landlords must create places that are “about experiences, not just transactions”.
“We have to resonate with the brands in the centre, and wellbeing is one way to optimise that.”
In other words, come here to spend your time as well as your money, and leave feeling good, with a spring in your step.
The wellness agenda stretches from nice clear signage and stress-free parking, to eye-contact and human encounters. It also embraces social issues like learning to support customers with dementia (and their families).
As British Land colleague Ben Dimson says, this means doing more than providing opportunities to spend money, and encouraging them to spend time as well.
“The role of shopping and the shopping centre is evolving, but still has some way to go. It will be more and more about how people want to spend their time. We’re already seeing that blending of activity so that shopping centres include things like a beauty service and post office and a medical type service. It’s not about a pure retail trip,” he says.
Intu’s director of corporate social responsibility, Alexander Nicoll, adds: “If people come to your shopping centre, and they don’t feel comforted and uplifted, then you are defeating your own business goal.”
This means improved air quality, natural light, and cultural events that provide an “uptick”.
“The boundaries to what you do in a shopping centre have disappeared – the only restraint is our imagination and resources,” says Nicoll.
