I've had so many interesting things sent to me this month, I thought I'd give a couple of them room on the blog site. You need to check out retail week to see the pictures, but I'm quite intrigued about the idea of 'pop-up shops!' Read and enjoy.
Breathing new life into dead space
August 21, 2009 | By John Ryan
http://www.retail-week.com/newsletter/5005610.article
With voids skyrocketing in the recession, landlords and developers need to be creative with empty space to keep shoppers interested. John Ryan reports on some of the inventive ideas being tested
News that about 12,000 independents and 7,000 branches of retail chains in the UK have closed over
the past year, taking vacancy rates from 4% to 12% by the end of June, means only one thing – a lot of empty space. With voids running at close to 20% in parts of the big cities, there is a need for urgent action if consumer confidence is not to slump further.
The problem is simple really. Confronted by a mall or high street with large numbers of empty units, the perception – and perception is all – is that things are bad and wallets will be speedily locked away. If this happens, an absolute decline in footfall seems inevitable and retail tenants begin to ask their landlords uncomfortable questions about whether they are doing enough to stimulate trade – leading to demands for rent cuts. It’s a vicious circle and one that many will recognise. But some of the more enlightened landlords and developers have acted pre-emptively to stop the rot.
They have done so by pursuing a distinctly non-traditional route – employing the services of the designers and architects normally used by retailers. Ronan Faherty, retail commercial director at developer and mall-owner Land Securities, has taken the plunge. He has retained consultancy Dalziel + Pow to work on ways of “using space creatively”, instead of just putting up the well-worn “coming soon” signs, seen in so many centres. “We looked at this and asked how can you create some visual impact and enhance the customer experience?” he says.
Before describing some of the measures that are under consideration to maintain footfall and positive perceptions, it’s worth noting elements of the present legislative framework that make this kind of thing relatively attractive. Adam Rawls, managing director of design consultancy Rawls & Company, says: “Business rates can be as much as the rent, but if you can show occupancy of part of the unit and prove that there is no access to the remainder, then you can benefit from a reduction in the rates.” He also points out that until January 31 next year, if a tenancy attracts a rent of less than £15,000 during the period, then no business rates will be payable.
Practically, this means that pop-up shops look attractive, but the problem is ensuring that they have sufficient resonance and quality to make the whole exercise worthwhile. Equally, for longer short-term tenancies, it makes sense to subdivide a unit so that each of the areas occupied will have a rentable area that falls under the £15,000 threshold.
And pop-up shops are presently in vogue. As Rawls points out, there are two schools of thought on this one. The first is to create pop-up shops that are aimed at making money. But allowing for the limited time available for such initiatives, this will be dependent on a pop-up’s owner managing to find a series of landlords willing to allow this to take place.
If this is a reality, then the possibility of creating pop-up formats that can be rapidly assembled and then dismantled prior to being taken to another location becomes a commercial proposition. This is cheap for both landlord and tenant, potentially profitable, and lends a degree of animation to a shopping centre or high street that certainly wouldn’t be achieved by a hoarding, no matter how colourful the graphic that has been applied.
The other pop-up option is the one presently favoured by brands and some retailers and is less about making money than lifting brand awareness. Matthew Brown, head of research at trend consultancy Echochamber, highlights Dutch department store Vroom & Dreesman’s decision to open a pop-up shop called “School Campus”, selling items for students. It’s still trading and, as Brown says: “They kept the rough concrete floors and used cardboard fixtures and it really looks great.” It’s a path that Sony, Gap, Nike and Louis Vuitton, have all followed and as Rawls remarks: “This is a chance for some brands to test-drive ideas that they might not try if they were to commit to a long-term lease.”
Outlet inspiration
However, there is more that can be done with retail space in need of occupants and the key seems to be not to follow retail norms. Rawls says that much can be learnt from outlet centres, which operate a model where a very high tenant churn is the norm. “The trick is for landlords to put in a really good fit, so that if a tenant does move in for a short time, they don’t have to change the floors and lighting and can just put their name over the door and get on and trade,” he says. “The full price shopping centres could learn a lot from the factory outlet centre model.”
He also suggests that for those landlords opting to use tenant-free space in unconventional, semi-temporary ways, the possibilities are very broad indeed. “Concentrate on putting in things that are unique to a centre and which you wouldn’t see elsewhere,” he says. He then lists everything from new car model launches to piggy-backing on the many festivals that take place in the UK during the summer. “If there’s a festival near a centre, create an area perhaps that could be filled with tents – make it a pop-up with a purpose,” he says.
For Land Securities, Dalziel + Pow associate director Marcus King has created a system called “White Box” – a click and build ceramic tile fit-out that enables a unit to be equipped very quickly, promoting tenant flexibility for landlords and making short-term promotional initiatives a possibility for retailers and brand owners. King says it’s possible that the system may get an outing at the forthcoming St David’s Centre 2 in the autumn.
“Voids give landlords the chance to create opportunities for smaller, cooler retailers who might not otherwise come into a centre,” says King. “All of this is very tied up with pop-up shops and it definitely isn’t about hoardings with graphics on them. On the whole, things feel a bit more positive than they did six months ago.”
In many ways, the surprising thing about all of this is that it hasn’t happened sooner. Pre-recession, the emphasis was on getting new space out of pipelines sooner rather than later, but perhaps more attention might have been paid to what really makes a high street or mall different from its competition.
Faherty comments that the past 12 months have altered approaches for both landlord and tenant. “It has evolved and is now about providing retailers with a much more flexible approach that will maximise their ability to generate sales in a more affordable business model. It also has the ability to provide smaller and more niche retailers with a new avenue to market.”
There have always been different ways to encourage tenants to sign on the dotted line, but to date the notion of low-cost, but eye-catching, short-term events, promotions and tenancies has not been among them. The financial shake-up has meant that long-term institutional leases of 10 or more years have vanished, with turnover arrangements taking their place. Now retailers and landlords are finding new ways to use design to make malls and high streets worthy of continued consumer patronage.
Making more of empty space
- Smaller spaces may be eligible for business rate holidays
- Make it easy for potential tenants to move in quickly
- Consider promotions linked to local events
- Hoardings should be a last resort, even when the graphics are colourfull