Churn – good or bad for our economy and town centres?

Today I presented at the first LDC Openings & Closures Summit, which Hogan Lovells kindly hosted in London. We had an excellent chair in Damian Wild, Editor of the Estates Gazette, along with a top panel. The panellists were Mathew Ditchburn from Hogan Lovells, Sam Fenwick from the BBC You & Yours consumer programme, Calum Ewing who is property director at Metro Bank, Michael Weedon from BIRA, Simon Danczuk MP for Rochdale, and Dr Karen Sieracki from Kaspar Associates who is a veteran property investment analyst.

My notes below are not a summary of my presentation but of the discussion that resulted. By pure coincidence, a debate in the House of Commons took place this afternoon on the High Street. It is worth reading the Hansard report and we were fortunate to have the summit views represented by Simon Danczuk MP and Robert Blackman-Woods MP (a previous LDC panellist who also came along today) who was leading the debate. Roberta made a very valid point, “It is a pity that the Minister was not at the Local Data Company summit this morning, because he would have heard people….” as we struggle to get any coalition MPs to attend or indeed take part in these thought leadership events. I am hoping that this will change in 2014 as Priti Patel MP has kindly agreed to join the next event panel. Details of the parliamentary debate can be read here: turgid stuff in parts but important for us all to see what political appetite there is for change.

Enough politics, let’s get back to the summit experts! Whilst the data was positive in terms of net change nationally, there was a consensus that we should prepare for more retailer failures in early 2014. This is reinforced by Company Watch data that cites over 20,000 retailers at risk! Independents have performed well, but it was questioned whether this is a result of genuine growth or incentives in terms of rents or business rates. A key point was mentioned about LDC data: whatever your views, it is a realistic view of the market that allows everyone to plan (that should probably read gives people the ‘opportunity to plan’).

One view on churn was that it is an indicator of economic vitality, but others argued that it is often a deterrent for consumers in towns as it introduces uncertainty of offer when you visit/shop. Politically, it was argued that in fact it is purely a reflection of the fragility of the economy, including insecure employment of which zero hours contracts are just one example. Or indeed, people utilising redundancy packages to realise a life ambition of running a shop or other retail/leisure outlet. I leave this to you to decide! A combination of both perhaps I say from the fence!

A big intrigue in the data was that the North West showed positive change, yet the wealthy South (London and the South East) showed decline. This was something I forecast two years ago, as the South does have a high concentration of offer, excellent transport links, and lots of new shiny developments such as Westfield’s, which is also coming soon to Croydon. The change in the North West, however, in many cases reflects the growth in the pawnbrokers, cheque cashing, and betting shops, and not new M&S’, Next’s, or Debenhams! It is clear that the large multiples are disinvesting in fringe locations and I cited a number of towns, of which Scunthorpe is the latest Arcadia casualty. In some towns it was mentioned that the space has just moved from the old to the new: King Street vs Spinningfields in Manchester was quoted as an example. At the end of the day, we have too much retail space and much of the space we have is not fit for experiential/destination comparison goods retailing, hence the move out of town or to large shopping centres.

The next big topic was around leadership. In times of crisis countries need great leaders. So who is the Churchill for the issues we now face? Everyone agreed that the issues we face should not be left to ‘well intentioned volunteers’, or indeed ‘interim managers’, as one member of the audience stated. Many local authorities do not have the knowledge to do what is expected of them and in many cases public consultations do not reflect the reality of the high street or consumer needs. The answer here is ‘action at a local level but fed and backed up by regional and national knowledge’, as acting in isolation is the road to ruin. The data and insight exists on all fronts, it is just not leveraged or indeed known about.

We then hit the issue of planning and the lack of control, or should I say legislation for local authorities to change things; but then again, if there is no master plan then making changes is gambling with success or failure. This fed through into the biz rates debate, as whilst LAs have authority to reduce biz rates, they do not have power to increase them. An example quoted was that a council might want to reduce rates in a town centre, but increase them out of town in order to redress the business operating costs between locations to try to influence occupation decisions. The challenge here is that the big out of town retailers probably have no intention of moving back into town, as there is not the stock or, they would argue, the customer appetite to operate from there. Experiential destination stores need ease of access for both customers and logistics in order to satisfy us – the demanding consumers. Many towns do not currently fit this profile and if they were, at what cost and would it actually result in retailer or consumer behavioural change? Probably not and some might argue that the ‘horse has bolted’!

Finally, the paradox in all of this debate around biz rates is that in many places (over 140 of them), BIDs are successfully raising a levy against biz rates, typically 1%, and they appear to be successful in that they are being re-elected and retailers are paying their dues. For me this shows that professional leadership at a local level works: where occupiers feel they have a real ‘seat at the table’ and have control over outcomes, in the same way as their own business, they are prepared to stomach the cost. Food for thought!

I am now in Leeds for the Squires Sanders retail event tomorrow and let’s see if rabbits top the bill as in London!