It has been another rollercoaster year for retail and leisure. Relationships between landlords and high street retailers were put to the test as the pandemic continued, owners were left with acres of empty retail spaces to fill and distressed sales mounted. But investors slowly regained confidence throughout the year amid strengthening occupational performance and signs of improvement in liquidity.
New entrants were another strong theme, with investors and occupiers spotting cut-price opportunities in retail and hospitality. The balance for shopping centre ownership in particular began to shift as institutions and pension funds sought to shrink their exposure. In hotels, more new players emerged as sellers revised their pricing expectations.
Industrial and logistics continued to outpace the other sectors, with yields drawing level with prime offices – but it remains to be seen whether development can keep up with the relentless pace of demand.
As we reach the final days of 2021, here are some of the key moments experienced in retail, leisure and logistics during the past 12 months.
January
The industry dug deep as England went into its third national lockdown, with the market bracing itself for yet more uncertainty and store closures.
Department store chain Debenhams, which began winding down its 124 stores in the previous year, closed its Oxford Street flagship, W1, while Frasers shut its iconic Jenners store in Edinburgh. Meanwhile, a rescue deal was agreed for Edinburgh Woollen Mill, closing 119 EWM and Ponden Home shops.
In a sign of confidence in the leisure sector’s recovery, buyout giant Blackstone struck a deal to buy Haven and Butlins parent Bourne Leisure, in a deal thought to value the business at around £3bn.
February
More vacant retail space hit the market as fast-fashion firm Asos bought Arcadia brands Topshop, Topman and Miss Selfridge, excluding all 70 of its stores. Among these was its landmark Topshop flagship on Oxford Street (more on that later).
The remaining brands – Dorothy Perkins, Wallis and Burton – were snapped up by rival online retailer Boohoo, which also chose to leave the bricks-and-mortar behind.
Dark stores continued to roll out at a rapid pace across the country, with grocery delivery start-ups such as Weezy, Getir, Gorillas and Dija racing for space to cater to pandemic-driven demand.
Ahead of March’s Budget, prime minister Boris Johnson set out a phased roadmap for lifting Covid-19 restrictions.
March
It was a month of several firsts. Among these, Amazon launched an Amazon Fresh store in Ealing Broadway, west London – its first physical store outside the US. It would go on to open a hair salon in London in the following month to test new tech.
In what was thought to be the first shopping centre to town centre conversion, Areli Real Estate and Tikehau Capital secured consent for their £500m regeneration project at Nicholson Quarter in Maidenhead.
Proposals for repurposing projects were in full flow. Nottingham City Council lodged plans to knock down the remainder of the Broadmarsh Centre, and Marks & Spencer filed plans for a large-scale, office-led overhaul at its Marble Arch store (more on that one later, too).
Hammerson suffered the biggest fall in net rental income and asset value in the group’s history. In Rita-Rose Gagné’s first annual results update as chief executive of Hammerson, she told EG that “nothing is off the table” where disposals were concerned and set out the first steps of her strategy for recovery.
As the John Lewis Partnership’s five-year estate strategy hit its stride, the retailer closed more stores, affecting some 1m sq ft of retail space.
April
Non-essential retail reopened, and pubs and restaurants installed hundreds of al fresco dining seats in preparation for more outdoor services.
The government began its commercial rents consultation to help it determine its next moves regarding the moratorium on evictions.
Prologis reclaimed ownership of the former Arcadia distribution centre in Daventry, with Boohoo signing for the space.
In the first batch of key decisions from court battles between landlords and retailers this year, judges ruled in favour of the landlords. Westfield London won its case against the Fragrance Shop in their dispute over unpaid rents, while Sports Direct and Cineworld were ordered to pay arrears on some of their stores…
May
… and the following month, a ruling revoked hairdressing chain Regis’ CVA.
But landlords suffered a double blow after their court challenge to New Look’s CVA was rejected and Virgin Active’s highly controversial restructuring plan was approved in the High Court. The latter, dubbed a “CVA on steroids”, prompted fears of a “world of hurt” for real estate.
Material uncertainty clauses were finally lifted for leisure and hospitality, eight months after being removed on most other valuations, including retail, signalling improved clarity on investment sentiment and a tentative step towards a return to normality.
Hammerson finally completed its £330m retail park sale to Brookfield, marking the landlord’s long-awaited exit from the sector.
New requirements grew as retail and leisure continued to reopen, particularly from new food and beverage operators and innovative leisure concepts, such as Monopoly.
June
The industry urged the government to lift its ban on commercial evictions, which was due to expire at the end of the month. But its calls were left unanswered when the ban was extended to March 2022, to much dismay.
The ongoing lack of stock in top-performing sector alternatives has driven most businesses to look at scaling up through M&A. In industrial, St Modwen agreed to a £1.3bn takeover offer from Blackstone.
It was a significant summer for data centre development. During this month, Panattoni was given the go-ahead to turn a former Sainsbury’s frozen food distribution depot in Hertfordshire into a 592,000 sq ft data centre, while Zurich Assurance got the thumbs up for a 559,700 sq ft data centre in Park Royal.
July
Just over a year after intu collapsed into administration, a clearer picture began to emerge for the former intu centres – among these, the £112m strategy for the four SGS shopping centres was approved, developer Stories was appointed to revamp Broadmarsh and Ellandi set out plans for a new leisure destination at Merry Hill.
Separately, intu’s former leaders were on the move – the collapsed shopping centre giant’s ex-chairman John Strachan joined niche agency CWM, while former chief executive David Fischel and centre performance director Martin Breeden co-founded a new firm called Fibre Real Estate.
Elsewhere, NewRiver REIT agreed to sell its Hawthorn pubs portfolio to Admiral Taverns for £222.3m.
August
Fifteen years after proposals to transform Croydon’s retail centre were first drawn up, ambitions for a £1.4bn shopping centre redevelopment led by Unibail-Rodamco-Westfield and Hammerson officially crumbled after planning consent expired.
The industrial occupier market went from strength to strength, highlighted by Bericote and Tritax Big Box REIT’s mega prelet to Ikea in Dartford, Kent.
September
In a sign of the times, prime shed yields drew level with London offices as the online shopping boom drove the latter to historic lows.
Demand for UK staycations boomed during the pandemic. Those looking for a slice of the action included JLL, which unveiled a new short-term rental platform to rival Airbnb.
NatWest offloaded its Project Mercatus non-performing loan portfolio, which comprised £400m of debt held against 15 shopping centres, to Attestor Capital, Octane Capital Partners and asset manager Ellandi.
As some of the biggest names in retail vanished from UK towns and cities, landlords were dealing with the dilemma of how to repurpose the vast amounts of empty space they left behind. Among these, the former Debenhams store on Oxford Street got the all-clear for a major offices revamp.
In the meantime, there was still plenty of action in the courts, as one Caffè Nero landlord failed in his bid to overturn the coffee chain’s CVA.
October
After a somewhat tepid period for retail investment, the market showed signs of warming up. In one of the biggest retail deals of the year, M&G Real Estate agreed to sell two malls – Galleries Washington in the North East and Cwmbran Centre in South Wales – to LCP for a combined £140m, at a yield of about 10%.
Deal activity in hotels, which picked up during the summer, also enjoyed a boost with Henderson Park’s deal to buy 12 Hilton hotels valued at more than £550m, as well as the £140m sale of the Belfry to a fund run by Goldman Sachs and Cedar Capital.
Amazon’s bricks-and-mortar reach extended beyond its Fresh concept when it opened its first 4-star store at Bluewater in Kent.
In a surprise exit from Hammerson, UK and Ireland managing director Mark Bourgeois left after four years in the leadership team. The same month would see Hammerson reportedly embark on a cost-cutting strategy that placed up to 40 head office roles at risk of redundancy.
Film studios enjoyed a blockbuster year, shaped by soaring demand for streaming entertainment. One of the industry’s standout deals took place during this month, when Netflix finally confirmed it is set to take space for a massive production hub at SEGRO’s Enfield business park
After a prolonged bidding war, US private equity giant Clayton Dubilier & Rice triumphed in the £7bn race to take over supermarket chain Morrisons.
Chancellor Rishi Sunak scrapped next year’s increase in business rates in his Autumn Budget, but rebuffed calls for wholesale reform.
In a substantial shake-up for central London retailing, Ikea bought the iconic former Topshop flagship for £378m as part of its strategy to add inner-city store formats to its portfolio…
November
…and Oxford Street’s offering looked bound to shift even further after consent was granted for an office-led conversion at its House of Fraser department store, bringing the retailer’s presence in the shopping district to an end.
Nearby, the huge office-led revamp at M&S’s store in Marble Arch was given the go-ahead – drawing heavy criticism for its carbon-heavy retrofit.
Landlords were finally able to review government proposals for legislation concerning disputes over rent accrued during the pandemic, through a draft bill into parliament and a new code of practice for owners and tenants.
Things were looking up for listed landlords with retail exposure, with both British Land and Landsec making their way back into the black. The duo also underlined major moves to make acquisitions and bulk up their portfolios, rather than focusing on disposals and shoring up. BL amassed a £600m London urban logistics pipeline, while Landsec set its sights on buying a bigger chunk of the Bluewater shopping centre as well as Nuveen’s designer outlets in Swindon and Cheshire Oaks. In the following month, Landsec would complete its takeover of U+I.
December
Debenhams returned to physical retailing after new owner Boohoo opened a 7,552 sq ft beauty concept at the Manchester Arndale.
Industrial and logistics enjoyed yet another bumper year, as take-up soared to record highs – although it stoked fears that there may only be around six months’ worth of standing stock left.
Ahead of Plan B restrictions coming into effect on the back of the omicron variant, footfall in the West End had been rising gradually. Visitor numbers grew by 3% week-on-week in the week beginning 6 December, according to the New West End Company, although it was still down by 30% compared with 2019. As Covid-19 case numbers jump in the crucial lead-up to Christmas, the industry awaits greater clarity on the longer-term impact the variant may bring.
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