Success for retail parks depends on approach

Investors with exposure to out of town retail know its potential to deliver strong returns.


12 May 2014

Victoria Retail Park Nottingham

Healthy demand from occupiers for space at prime sites, complimented by a planning-led undersupply, is clearly a favourable dynamic. However, investors can't rely on this to drive returns indefinitely. They need to invest for the long term to maximise the potential of the assets they manage.

The role of an active manager first and foremost is to work with retailers to provide high quality destinations for customers. From our experiences in the West End, we know success comes from a holistic approach to place making which ensures that schemes deliver, not just in the experience they offer on site, but in the way they meet the demands of 21st century shoppers across a range of physical and online platforms. Adding floor space to bring in new tenants, incorporating leisure uses like restaurants and cafes, and investing to create attractive and accessible public spaces, all elevate assets from functional shopping locations to places that people want to visit and spend their valuable leisure time. Similarly, investors who incorporate the latest multi-platform trends into the DNA of their parks will reap the rewards. Click and collect, for example, offers a fantastic opportunity for retail parks to appeal to a generation of consumers for which the internet forms an integral part of their shopping experience.

However, whilst creating world class retail destinations is a staple for success in this sector, it is only one part of a much wider picture. Consumers are increasingly making choices based, not just on the quality of a product, but on how businesses are run and the values they stand for. For property owners and occupiers, this means long term commercial success is intrinsically linked with the sustainability of their operations. This is especially the case for out of town retail, which some commentators are quick to label as unsustainable, citing dependence on car travel, the perceived impact these schemes have on the high street and poor energy efficiency to pass judgement.

There is fantastic potential for the out of town sector to prove these commentators wrong; though there is still a long way to go. For example, great progress can be made at the design stage of new schemes, ensuring that the next generation of retail parks are built to a much higher environmental standard than the current stock. Our MK1 Shopping Park in Milton Keynes, for example, is the first in the UK to receive a BREEAM Excellent rating. For existing parks, solar PV, cycling facilities, promoting car sharing schemes and using open space for biodiversity projects are all initiatives that we're currently exploring.

As important as addressing environmental challenges is working to embed retail parks as assets to local communities, challenging the idea that parks detract from community cohesion. Out of town isn't the architect of the troubles facing local high streets, this is down to long term trends in the consumer and occupier markets that are determining how and where people shop. However, the retail park sector can learn a lot from the high street, especially about how destinations can contribute positively to local communities. In managing our portfolio, we're looking closely at how to adopt some of these principles, for example by creating space on parks for community hubs and by engaging local schools and community groups across the portfolio. For progressive asset managers with a long-term outlook, this approach is the basis for creating sustainable retail destinations that stand the test of time.

Crucially, the relationship between occupiers and owners is at the heart of a successful, sustainable retail park sector. We benefit from critical mass which enables us to establish successful commercial relationships with retailers. These relationships also mean that we can work with our tenants to explore how things like on-site renewables or community initiatives could benefit our businesses, the local area and the sustainability of the sector.

A progressive, approach to sustainability is at the core of our business, whether it's installing the UK's first molten carbonate fuel cell in one of our central London developments, supporting renewable energy offshore, or adopting a forward thinking approach to out of town retail. We believe that it is this approach which will be crucial to the long term success of our prime regional retail interests, as well as our wider portfolio.