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Mishcon Academy: Digital Sessions - The Future of the High Street

Posted on 29 October 2020

Mishcon Academy: Digital Sessions are a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals today.

In this session our panel considered the challenges and opportunities facing our high streets and town centres, the impact of COVID-19, how landlords are adapting and who are the high street tenants of the future.

The panel, moderated by Mishcon Partner and Head of Planning Anita Rivera, comprised: Rebeca Guzman Vidal, Group Head of Retail Strategy at Chelsfield; John Hoyle, Founder and CEO of Sook; Dr Jackie Mulligan, Founder and CEO of ShopAppy; and Mark Robinson, Chair of High Streets Task Force.

This live session was held on 22 October 2020. All information was correct at time of recording.

The Mishcon Academy Digital Sessions

Anita Rivera

So, welcome everyone.  My name is Anita Rivera and I’ll be your host today.  This is the third in our series of Mishcon Academy Real Estate Digital Sessions which basically look at particular sectors across the real estate sphere and how they’re faring post-Covid.  So, today we’re discussing the future of the high street in the continuing wake of this Covid pandemic.  Now, we know that Covid has accelerated a number of trends that have already been impacting the high streets and city centres including things like the struggle to compete with out-of-town retail and online shopping.  The challenges relating to the fragmented land ownership on the high street and basically significant tax and business rate burdens.  Added to that there are the new challenges and tensions, such as social distancing requirements and changing footfalls and transport patterns which reflect the way we’re living and we’re working these days.  Recently the Government launched an enquiry to examine the long-term consequences of Covid on the high street and today we’re going to discuss some of these implications including changing uses and demands, how landlords and Local Authorities can adapt and who are the tenants of the future? I’m joined today by Rebeca Guzman Vidal.  Rebeca is the group head of retail strategy at Chelsfield.  John Hoyle is the Founder and CEO of Sook.  Dr Jackie Mulligan, the Founder and CEO of ShopAppy and last but not least we have Mark Robinson and Mark is the chair of the High Streets Task Force.  So, Mark, what do you think are some of the main trends on the high street that have been accelerated by the pandemic?

Mark Robinson

Well, change was happening anyway, I think we all know that and maybe it wasn’t happening quickly enough.  And what you know, it’s been well said you know, Covid made 10 years of change happen in six months.  We were carrying on doing the way of business in retail property that probably hasn’t been fit for purpose for at least 20 or 30 years but we hadn’t really realised because there was nothing forcing us to change.  So, it’s not just making things happen more quickly, what it’s done is exposed underlying flaws in our entire business model which we need to address.  Things like business taxation, things like insolvency law, which is a massive problem for investors and banks at the moment and fundamentally as well is the way we actually interact between owners and occupiers of space. 

Anita Rivera

Jackie, with ShopAppy, I mean how do you see you know, the change of the kind of the community centres and you know, adaptation, resilience of local economies to this?

Jackie Mulligan

It has exposed the major flaws in high streets but also, what it has allowed is the more… the positive sentiment we could actually see pre-Covid towards localism.  The increase in recognition of how localism plays into climate change emergency you know, how better behaviours will help our planet, that kind of thing.  That was in the psyche.  55% of people were saying they preferred to shop local and people were interested in, more and more interested in provenance.  But we weren’t seeing them in the high street, otherwise our high streets would have been succeeding.  So, what it has accelerated is digitalisation, which was long overdue.  So, more and more businesses have gone online which is great and that will help people access the high street.  The high street has to come into people’s homes, into the way they shop as well as be there physically. 

Anita Rivera

That’s interesting.  John, if I can bring you in now, how do you see what your model brings to the future of the high street?

John Hoyle

Well, we want to maximise the utility of empty shops which, as we all know, there are many of.  And make them accessible to a hugely burgeoning sector of digitally-native online brands who want a home.  We have a system which you can rent by the hour and curate really easily that removes one of the big obstacles to the occupation of shops which is the expense and time of physical fit-outs.  By removing that you can allow people to use the hours that are relevant to them. 

Anita Rivera

And Rebeca, how do you see you know, globally the impact of Covid in other retail centres?  State-side or Asia, just across the board. 

Rebeca Guzman Vidal

China as a whole is obviously a much bigger infrastructure and therefore online penetration is far higher than anywhere else in the world but I do think that people still want to shop local.  Now, I think in China what’s happened is they’ve gone, they’re probably far more advanced that we are in this kind of Omni Channel Strategy in that everything is so seamless.  You can buy something on WeChat.  You can go and see it in the store, vice-versa.  There’s a lot more synergy, I would say, between the two and I think that’s something that perhaps we in Europe, in the UK and the US, haven’t quite cracked yet. 

Anita Rivera

Do you think that there needs to be more changes in legislation or in policy to facilitate further growth and adaptivity of ideas and innovation on the high street?

Mark Robinson

I mean one of the really good things to come out of the crisis is the Covid response and the task force change, it pivoted completely away from a plan of rolling out expertise and capacity into local Government and really focused on Covid response.  And I think did it successfully to help advise places on how to cope.  One of the great trends – super trends – we’ve seen arrive is that tactical urbanism, which, which is fantastic.  It’s basically, we’ve got to change stuff to see if it works and if it doesn’t work, we’ll do something else.  So, things that would have taken forever to get through Local Authority permission previously you know, part-time pedestrianisation, closing off parking bays and turning them into pop-up parks.  These are brilliant innovations that wouldn’t have happened otherwise.  One of the problems with the planning forms though, they are very, very broad and there will be some unintended consequences.  If you own a big lump of commercial space out of town that isn’t working as an office park, you can now turn it into a retail park.  Which that in itself is not a good thing for the local high street. 

Anita Rivera

And John, what about you?  Do you think that the planning regime helps your type of model business?

John Hoyle

Yes.  I mean there’s an element of the changes that are brilliant for us.  Being able to be flexible around A1 is, is something we were going to push the envelope of anyway.  But now we can do it without essentially contravening any laws, which is great and you know, our belief is that - and this isn’t a commonly-held view – is that the high street’s about much more than retail.  Being able to do other things which are beneficial to the community, to place, but can also generate revenue, it’s got to be good for everyone. 

Anita Rivera

What is the purpose of the high street you know, is that purpose slightly changing now? Is there more desire to have experiences rather than just going and buying items?

Rebeca Guzman Vidal

I do think yes to experience but also yes to convenience and to me they’re not necessarily polar opposites.  They’re often painted as that.  But I do think the only way the high street survives is if it reclaims that element of convenience and if it provides pleasant experiences.  The Finnish postal service has just created this concept, if you go and pick up your parcel you can try anything on there and if you don’t like it everything around you is ready for you to kind of repackage and return and it’s all done in a kind of very cool way.  It’s got a little coffee shop within the store.  So, to me, that’s the kind of things that you’d want to see in the high street going forward.  It needs to be convenient.  I don’t think it should be romanticised.  I think in Europe, and in particular in the UK from my experience there is this idea that all communities want the same thing and we need to balance how communities use the town centres is also based on what that community is and one size cannot fit all. 

Jackie Mulligan

Town centres should be spaces for experimental ideas.  Concepts to come forward.  People to try out new things.  Too many of us have been happy to cope with the fact that there has been Ghost Towns around but hey ho, everything is about the city.  And what we’ve seen is a rebalance into the economy and town centres perhaps could relinquish some of the role of actually being a place, a birthplace for new enterprises.  I couldn’t agree more with the relevancy question you know, have we got high streets that are relevant? Have we got high streets that are easily accessible? If you live in tourist economies you know, in the Covid outbreak you may have had limited options you know, you could live in a seaside resort but you don’t really want a stick of rock, you want some seasonal fruit and veg but your grocer’s gone.  So, we need that kind of multi-functional mixed-use town centre.  Everyone will look different because it will be reflective of the community and it isn’t just about age, it’s also about ethnicity, it’s all sorts and we don’t have enough diversity in the discussions generally, around towns and cities. 

Mark Robinson

What is quite strange about a lot of the debates we have in this day and age is we are still judging the success of the high street through a retail lens.  But if we look at the fact that retail was the dominant, most valuable use that drove out all of the other uses that used to be in our town centres.  And the fact that we’re going to go back to a place and a time where actually retail is part of the fibre of mixed town centres, we shouldn’t be fearing, we should be embracing, we should be looking forward to it.  It does mean that retail investors and landlords and lenders, like me are going to probably lose a lot of money but, you know, I’ve kind of come to terms with that.  If we can start thinking really about what does success look like based upon the purpose of place, as Jackie was saying.  What makes that place unique and not a one-size-fits-all solution? I think we’ve got quite an exciting future for a lot of places. 

Anita Rivera

That’s a… you have talked about landlords, are they welcoming to the idea of being more flexible about their land assets?

Mark Robinson

I mean yes.  I think Local Authorities are hugely permissive, very pro-intervention in their town centres now so, you are pushing at an open door.  One of the massive problems we have within town centres is fractional ownership.  It’s very hard to try and change when every other shop is owned by somebody else with a completely different motivation.  So, is there a role for local Government to play in consolidating ownership, to be very pro-development or even pro-asset management? Quite possibly because if you look at the great successes – not withstanding the Covid crisis – it is big land estates in London for example or even in Birmingham, the big cities.  Shopping centres tended to do better than high streets because again you had one owner with a mission and a vision curating that space.  That is a challenge that we have in the high street. 

Anita Rivera

Do you see more landlords accepting turnover rents as these are becoming more normal than an exception? And I’m going to go to Rebeca for that, if I may?

Rebeca Guzman Vidal

The million dollar question, right.  Will we accept them? I think this has got to be a concerted effort.  I think the valuers have a place in this conversation, a massive, massive place in the conversation.  I think the bankers that sit behind all of our debt also deserve a place at the table.  I think us as Landlords, we probably need to be more open with the retailers as to what kind of returns do we expect to derive from our assets and retailers have to be more transparent.  If we can achieve more transparency as to what everybody’s KPIs are, what everyone expects from the transaction, then yes with a lot of pain we could move to a sort of Asian model of fixed and variable rents but it will be incredibly painful and I think we need to come to a place where we can bridge that gap and retailers accept that that base rent is not going to be 50% of what it was.  It might be 60, 70, 80, 90 and they will have to accept a percentage of variables for when things get better and I think that’s where in our conversations right now, a lot of brands seem very reticent to share what the upside could look like. 

Anita Rivera

How important is sustainability to the future of the high street and where in the chain is this being driven?

Rebeca Guzman Vidal

I think it comes from the consumer and I think going back to right at the beginning of our conversation where we said, ‘What’s changed?’ I mean, the consumer has become so much more aware and cares about sustainability in a way that we expected to happen probably in the next two, three years and it’s happened in three months.  From a landlord perspective, it’s so kind of critical to what we do these days.  Whether it’s you know, building something new or making sure that your existing assets are you know, as green as they can possibly be and also actually having the wider conversation which is what’s happening at Chelsfield right now is how far do we take our ESG policy in terms of what do we expect from our occupiers?  Because you can only go so far in the way you build your buildings and maintain them but you know, one of the points that John mentioned earlier is ‘fit-outs’.  Fit-outs are incredibly unsustainable.  There’s kind of no transparency in that supply chain.  Like, what happens to the one that gets discarded?  Does it get recycled? Yes, no.  And so as landlords I think it’s also our responsibility to try and work closer with our occupiers to figure out a way to improve together rather than we have our own goals and you have your own. 

Mark Robinson

I’m a sustainable consumer sceptic. 

Anita Rivera

Ooh.  Interesting. 

Mark Robinson

Whenever I sit on a panel like this, everyone says, ‘Yeah.  It’s being driven by the consumers.  It’s being driven by the millennial.  It’s all the millennials.’ I’ve got a teenage daughter who…

Anita Rivera

That would be me. 

Mark Robinson

… plastic crap online on a daily basis and happily gets it delivered to the front door and happily has it whisked away, for free.  Which is unsustainable for everybody.  So, you know, if the consumer is… cared as much about the environment as we think that they do or actually as corporately as some of us are acting, how are we getting this burgeoning online growth which is the least sustainable way of shopping?

Jackie Mulligan

So, I see the sustainability thing as being policy-led, a lot of it because there is a greater purpose and there is a political and environmental imperative that we do something.  Because our planet is burning and we need to do something.  So you know, it has to be both, we have to help inform consumers about the choices they’re making and have leadership and businesses that are going towards that greater purpose. 

Anita Rivera

Where do you see the high street, local communities in five years from now? You know is the future looking pretty bright?

John Hoyle

I think it’s really looking fantastically bright.  I think there’ll be a contraction.  I think that’s inevitable.  But the retail that remains will be more efficient.  In the already best-located areas and will be delivering a much more balanced, I suppose, ecosystem where risk is shared a bit more clearly and a whole new generation of occupiers will be welcomed into spaces that in the last decade or two they’ve been priced out of. 

Jackie Mulligan

What I think we all have to do is just look at what future of the high street do we want in five years? What I want is mixed-use, inclusive, sustainable, diverse, lovely vibrant businesses feeling safe, feeling like everybody had the right to live in a place and that we do operate in a sustainable way.  Whether that’s true or not, who knows?  Everybody here has a role to play in shaping their desire. 

Rebeca Guzman Vidal

I do believe that we, as consumers, are becoming more demanding and therefore the brands that stay are the ones that are giving us best value.  And I agree with the whole piece about making places accessible and inclusive for everyone.  Yes, we all want that dream but I also think it is an achievable dream. 

Mark Robinson

Five years is an interesting timeframe.  We can’t turn around the last 100 years of malpractice in five years, I’m afraid but we’ll be making good steps forward I think and I think a really important way we’ll know if we’re on the right track is when we stop judging the success of our high streets in purely retail terms. 

Anita Rivera

Pretty thought-provoking.  Fabulous, thank you.  We are just at the end of this session.  I think it’s been fabulous and really interesting so, thank you John.  Thank you Jackie.  Thank you Rebeca and Mark.  And thank you all to the audience for joining us today.  It’s been great. 

The Mishcon Academy Digital Sessions

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