Seismic shifts in the basic forces of supply and demand, partly due to the changing nature of shopping, is changing the old way of doing retail commerce via face to face transactions, shown this week by M&S’s move to reduce its footprint in its flagship Oxford Street store.
Scott Keown, commercial real estate partner at JMW Solicitors, says: “Occupiers who carry the burden of inefficiently utilised space will feel the pain on their bottom line; and owners/investors/landlords have already seen declining demand for, and returns on, certain types of assets still being flogged for tired traditional uses – in particular large format department store retail assets – and so they are rethinking their strategies and adopting new models in response to what is happening.
“Everyone, including occupiers such as Primark and M&S, should be carefully evaluating their existing real estate portfolio and/or exposure and for some this evaluation will reveal opportunities to unlock inherent value (the proposed M&S Oxford Street redevelopment is a great example) and for others it will be a case of extracting themselves from costly and inefficient leasing commitments (large high street banks have been doing this over a number of years to divest themselves of excess leasehold property commitments and costly under-utilised freeholds). Either way, whether a party is unlocking value or optimising efficiency, these are urgent and important steps that must be taken.”
Scott’s advice for department stores and businesses which have a physical high street presence is that they should view this shift as an opportunity to: (i) right-size their real estate portfolios in a way that meets changing customer demand; (ii) unlock value by repurposing existing retail assets to more profitable and potentially utilitarian uses. “In a post-COVID world there is going to be huge demand for offerings linked to leisure and health/sport uses – there is huge opportunity and M&S has clearly recognised this and is now taking active steps to move with the times. The worst thing anyone could do right now is “sit on their hands” and wait for things to return to the “way they used to be” – that isn’t going to happen!”
To speak with Scott or if he can offer further insight or comment on the topic please let me know.
