The Great Retail Reset
October 1, 2021
Redevco is Rolling Up its Sleeves for the Great Retail Reset
Much has been written and said about the future of retail, especially the need to repurpose vacant and obsolete stores since the outbreak of Covid-19. A debate that is by no means new, but the pandemic has added a sense of urgency to the discussion. Trends already underway, such as the growth in e-commerce and online sales, have accelerated in the past 18 months. The Great Retail Reset, already in our sights before the coronavirus crisis, has led us to continue to seek out repurposing opportunities in line with our ambition to create vibrant urban locations in our chosen markets. A growing number of our tenants now come from beyond the traditional retail landscape, and we firmly believe that a mix of functions including hotels, leisure, offices and residential are vital ingredients for an attractive and liveable urban environment.
Our portfolio already includes several examples of redesigned retail assets, and we continue to add more. Recently we announced that two hotels, lifestyle brand “Hyatt Centric” and the extended-stay brand “Stay KooooK” by SV Hotel, will open in the refurbished C&A department store in Hamburg in 2025. Such refurbishments are not new for us. Earlier this year we opened a 25,000 square metres mixed-used scheme in the historic centre of Lille in northern France following a large-scale redevelopment started in 2017. Le 31 – as the multifunctional destination is called – offers a mix of commercial uses in response to new ways of living and working for a society that is undergoing radical change. The tenant mix not only comprises sports and fashion retailers, food and beverage operators, but also includes a hotel, a (co-)working space, a climbing wall, a gym and an escape game.
Elsewhere in France, in the historic city centre of Bordeaux, we transformed an abandoned industrial site into a lively pedestrian district organised around retail, leisure and housing. Located at the junction of two of Bordeaux’s busiest high streets, Promenade Sainte-Catherine offers a 28,000 square metre inner-city open-air scheme including a 19,000 square metre retail experience. The combination of new and familiar brands and concepts in fashion, beauty, home furnishings, leisure and gastronomy makes for a buzzing meeting place.
Our goal is to achieve a net zero carbon portfolio by 2040 and all these projects are carried out in line with this ambition. The pandemic is accelerating shifts in people’s needs, habits and priorities and our cities are being transformed at their core, as they become increasingly digital and more sustainable. Investing responsibly is a crucial part of our business and our vision is for cities to contribute positively to people’s health and wellbeing. The Great Retail Reset is also challenging us to think creatively and reimagine our urban landscapes for the needs of future generations. Through our developments and refurbishments, we strongly believe we can create environments where retail is no longer in survival mode but a star actor on a carefully curated stage.
We have put this in to practice with our Hanningtons’ Brighton project. We redeveloped this area in the historic ‘Lanes’ neighbourhood in this popular seaside resort into a mixed-use destination. We created a new Lane and entrance to the Lanes from North Street, added premium office suites and residential accommodation, and reconfigured shops to provide exciting new spaces for retailers, restaurants, and cafes. This development, located in the heart of the city’s vibrant shopping district, epitomises all the key factors that Redevco is looking for in its investments. It is part of an attractive, historic shopping district in the heart of an affluent and creative town that is a magnet for visitors.
Redevco are keen to do more of these projects and believe there will be a huge need for them in future. In the UK alone, 40% of retail space has become obsolete, according to data from ecommerceDB.com. That is equal to 42 million square metres or, to put it more poignantly, the equivalent of 175 Westfield London’s, 227 Metro centres or 284 Bluewater shopping centres! The UK leads in Europe on ecommerce penetration and saw online sales soar by no less than 27% in 2020. While the pace of growth has since slowed somewhat, market expansion is expected to continue over the next few years: the Statista Digital Market Outlook predicts that the compound annual growth rate for 2020-2024 will be 6%. We’re seeing a similar trend across continental Europe.
Repurposing vacant or obsolete retail is not an easy fix, however. There are plenty of obstacles along the way from stringent planning restrictions through to challenging requirements, such as high parking norms for residential accommodation. Building a financially sound business case is therefore not always straightforward.
The good news is that investors are still willing to spend on real estate. According to INREV’s Investor Intentions Survey 2021, investor appetite for the asset class has, in fact, increased somewhat as investors look for opportunities amongst the uncertainty. There is also a clear recognition that Covid has brought lasting changes to the way the built environment is used, especially in retail and offices, and repurposing will be most prevalent in both these sectors. Indeed, many investors see redevelopment as an attractive way to acquire core product.
We agree wholeheartedly with that conclusion and are rolling up our sleeves and getting to work!