Simon Russian has taken over as Head of Retail at LGIM Real Assets. We talked to him about the challenges and opportunities his new role offers.
Simon Russian doesn’t have to go far from his home to see the challenges that the UK’s shopping scene faces. Around the corner from his house in south west London is Northcote Road. Gentrification saw it thrive in the 1980s and 90s with the sort of independent mix of shopping, restaurants and bars that is now talked about as an ideal. Today, more than a dozen properties stand empty.
Russian observes: “Quite a few nationals moved in when the street was doing well and the rental tone went up and then business rate increases hit which made it an unsustainable pitch for independents. “At the bottom of my road there was a newsagent which had been there for 30 year. He provided a massive service to the community and everyone loved him, but he shut down before Christmas because of his rates bill.”
The problems of a single street in London may seem a million miles from the type of large scale shopping centres that LGIM own, but the lesson about getting the mix wrong – and the unintended consequences of the business rates regime – are not lost on Russian.
Prior to being appointed Head of Retail, he had been overseeing development of The Lexicon in Bracknell - the £240m retail and leisure town centre destination. Now at almost 95% occupancy, the scheme has transformed the town centre which opened in September last year. Bracknell’s footfall has more than quadrupled since the centre’s launch.
Russian reports: “The previous town centre was so challenged; we weren’t just extending what was already a successful town. The fact it’s a hugely convenient shop for a wide catchment area has made a big difference. We were very fortunate to have had a wide variety of occupiers, in particular Fenwick as the main anchor who have a real point of difference in that locality.
“The Lexicon is all about putting a heart back in to the town; there was nowhere to meet before and now there are meeting places and people are proud of the town centre. That feedback has been particularly rewarding.”
A central part of Russian’s role is to take a ‘strategic and holistic view on all Legal & General’s retail assets to identify areas for change and innovation, ensuring that it creates long-lasting schemes that improve the urban environment’. In this context, his focus is now on projects at Dolphin Shopping Centre in Poole; The Grafton Centre in Cambridge; Dover St. James; The Arndale Centre in Eastbourne; Thorpe Park Leeds; and Jackson Square in Bishops Stortford.
“You need to be continually improving things to add value. It doesn’t take very much for occupiers to say: ‘Oh, this hasn’t had any love and attention for a long time’. You need to continually keep doing that; investigating what the customers want; what the occupiers want and delivering it.
“Creating and improving a retail destination is more than just carrying out a refresh. We need to take a strategic view on how our retail schemes fit within a wider community so that we are regenerating areas in a holistic and joined up way. Deeper occupier engagement and a hands-on approach are also key.”
The interview for this article takes place just days after announcements from Toys R Us, Maplin and New Look about their respective difficulties. Russian is candid on the subject: “New Look will not be alone in terms of having to right-size their portfolio. As a brand, we think New Look has got legs; it’s got brand loyalty but clearly they lost their way. We want to work with them to right-size the portfolio they have with us and then hopefully we can grow it from there and they can move on. We’ve just opened a new store with them in Poole and that’s been a great success, but it’s about a third of the size of some of the other ones that we’ve got.
One of LGIM’s most transformative schemes is the St James project in Dover which has swept away a 1970s eyesore tower, and on completion it will provide 156,000 sq ft of retail and leisure space.
The retail element is to be anchored by major brands including Marks & Spencer and Next, whilst the leisure component includes a recently opened six-screen Cineworld Cinema. The scheme will also create a 108-room Travelodge hotel and six restaurants.
“Because of the ferry terminal, there’s huge throughput of people in Dover. Obviously, you can’t get all of them to stop but we believe there is potential to capture business from that while the scheme will also benefit from new residential development nearby. It will bring life to the whole area.”
Further along the south coast, Russian and his team are also working on a reinvigoration of the former Arndale Centre in Eastbourne.
“We’ve owned the centre for more than 25 years and have now rebranded it as The Beacon. The project has been about getting the centre the right size and mix. Interestingly, Cineworld have relocated to the centre from out of town where even though they had a sea of free parking, they saw the benefit being in the town centre.”
If town centre shopping environments are going to be made fit for purpose then everyone acknowledges that local authorities have a central role to play. In the course of his career, Russian has seen a major change in the attitudes of local authorities with constructive collaboration replacing some of the negative approach of the past.
“I think the negativity has largely gone. You only got to look at some of the schemes that are and moving forward which are public/private sector partnerships – projects like Sheffield and Camberley. The cheap finance available to local authorities from the Public Works has been criticised in some instances as having purely served to drive up the values of existing investments as councils have sought a return arbitrage. But some local authorities have used the opportunity to buy-in holdings in their own town centres to try and enhance them.”
One aspect of the UK’s retail property landscape that everyone is in agreement about is that there are too many shops. Russian believes that local authorities have a key role in addressing this problem.
“Having flexibility from a planning point of view - even more flexibility than there currently is - is going to be essential to regeneration and being able to bring different uses into a location. Without that, there’s still going to be just too much space.
“Alternative uses to shopping are going to be crucial and - where you still have a shopping environment – you’ll need to do something that differentiates the location. Young people in particular sometimes just don’t want the normal labels, they want something unique which reflects individuality. You can’t just pay lip service to that; you’ve got to do it.”