Saturday 29 April 2017

Landlords must act to aid squeezed retailers

The changing economic environment in Ireland continues to present significant challenges for landlords and retailers. In order to sustain the quality and quantum of the retail market it is vital that a spirit of partnership exists between both parties.

After three austerity budgets and a further three in the pipeline, trading conditions have deteriorated, consumers continue to save and curtail spending and retailers' cash flow has been squeezed.

Landlords now have to be pro-active with retailers.

Some regional towns are in a fragile position and those landlords adopting a hands-on approach understand that footfall has to be converted into sales and sales into rent. This sales to rent relationship is vital as the number of turnover leases increase.

In the past estate agents utilised the traditional isochrones approach to calculating retail catchments by combining the total populations within certain drive times of a retail scheme.

For example a proposed retail centre in Town "A" previously would have claimed a catchment population within a 30 or 60 minute drive. This approach is now obsolete.

In 2009, Colliers International launched a new approach called Scheme Repositioning.

Our primary goal was to reposition shopping schemes, town centres, and breathe new life into them. Colliers now manages over two million sq ft of regional retail space outside Dublin.

The High Street in Ashbourne has been particularly successful in its repositioning with footfall up 15pc and void space reduced to 10pc from 23pc. Rent and service charge collection rates have improved dramatically and new lettings include eMobile, Iceland and Crazy Prices. The process was undertaken in three stages:

Stage 1 realigned the catchment for the centre and determined disposable income of its shoppers. The approach identified competing schemes, their position within the catchment hierarchy (either comparison or convenience offering) and also identified key employers, demographics, schools, clubs and societies which are the town's lifeblood. SWOT analysis of strengths, weaknesses, opportunities and threats to determine a market position were also carried out.

Stage 2 involved marketing. It has been clear that throughout the recession the best type of marketing tool was one in which the consumer was targeted as close to the point of sale as possible.

Modern marketing requires utilisation of retail schemes, websites such as Twitter and Facebook, and aggressive targeting of consumers with electronic vouchers for example. This was successful in Ashbourne with a customer data base of 2,500 established (see www.highstreetashbourne.ie).

Stage 3 sets out to improve the competitiveness of service charges through turnover-based leases which include rents, rates and service charges on three- to five-year terms. Whilst rental income remains king -- those landlords that compromise on standards do so at their peril.

Consumers still expect an enjoyable retail ambience and experience. The Ashbourne High Street service charge rate was set particularly keen at €3.50 per sq ft.

Strong retail centres need to be run like a business and not a piece of real estate. To do that, the market positioning and business objectives must be clearly worked out.

The retail destination must then have a marketing strategy specifically designed to suit current economic conditions and the competitive environment. Such strategies only work if based on a realistic financial and partnership model.

Aidan Grimes is director of Colliers International

Indo Property

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