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Expert opinions, profiles, market trends, debate and the latest news in an ever-changing sector

GROUP • RESIDENTIAL Tuesday 23rd September 2014



What makes a place successful as a retail and leisure destination? As consumers, we tend to be rather fickle and what attracts us to a place one week may, in due course, fall out of our favour.

So is our choice driven by what a place looks like, feels and offers? Is it the cost to get there and stay there, or the other people who frequent it? Over the years, various ‘blackbox’ data models have been developed to try and evaluate the comparative strengths of locations.

They continue to turn out stats as they have done for many years but I believe that many of these models are no longer fit for purpose and do not take account of the new data and technologies available to make them smarter.

Together with our partners (academic and commercial), we have been working to deliver location analysis which is more informed, more relevant and, most importantly, time sensitive to the changes taking place.

We have partnered with a number of the UK’s leading universities to create innovative and dynamic ways to look at the significant changes happening within the retail and leisure sectors and the places they operate from.

So where do you start in assessing a particular retailing location?

Locations, in our view, are determined by their economic wealth and market size. This is essentially the ratio of people to places and what spending power and propensity they have.

When looking at modern towns and cities you need to look beyond the city walls to the standalone supermarkets, the retail/shopping parks, the leisure parks and the small neighbourhood locations.

The key attributes of these locations lie in the retail occupancy and vacancy profiles along with the change over time.

Recently we updated a location ‘health’ model that was developed in partnership with Morgan Stanley. This analyses, grades and scores 3,000 High Streets (town centres), shopping centres and retail/leisure/shopping parks, and builds on the diversity index that we developed in partnership with the Oxford Institute of Retail Management in 2013.

Analysis of the 7 key attributes adjacent derives a score for each of the 3,000 locations. The range of these scores currently goes from -30 through to +158; the latter of which is the rating for London’s West End.

In addition to the location score, an index score of between 1 (poor) to 9 (very good) is then also given to every small, medium and large High Street, shopping centre and retail/leisure park in that location. The model is then rolled back 12 months to provide an indicator of 12-month change which is designated as either ‘improving’, ‘weakening’ or ‘stable’.

This enables occupiers, landlords, investors and local authorities to benchmark their locations and, in the case of retailers, look at the correlation with sales performance.

By way of example if you look at the large high street locations (400+ units) then the range is varied with Manchester, Edinburgh, York, Exeter and Glasgow being examples of cities with an index score of 7 (strong) and scores ranging from +158 to +31.

In contrast, Bolton, Paisley, Walsall, Preston, Great Yarmouth, Bradford, Watford and Grantham are examples of an index rating of 1 (very weak) with a range in scores from -21 to -8. When you then apply these location scores to retailer portfolios, it can create a very interesting guide to current and future performance (with the caveat that precise performance is always unique to a retailer based on their business type and the costs of occupation in a given location).

Similarly, application of the scores can provide a portfolio-wide analysis which shows a retailer how many of its locations are improving, weakening or stable.

Location is as important as it ever used to be but what is clear is that there are more competing physical locations than ever and that’s before accounting for the 13% of retail sales that now take place online.

Bricks and mortar locations remain a key component to almost every retail business and the best platform from which to engage, excite and extract sales from customers. Of course, for leisure operators – whose offer invariably cannot be replicated online – getting the physical location of operations right is of paramount importance.

Whilst lease lengths have come down to 10-15 years from 25 years it is still a very expensive decision to open or close a store.

Against that backdrop, to guide business strategy it is essential to leverage all the data, technology and innovation that is available.

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