A N E W A P P R O A C H T O D E PA RT M E N T A N D L A R G E S T O R E A S S E T S

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U N L O C K I N G T H E VA L U E O F L A R G E S T O R E S

It’s clear that huge swathes of redundant retail property urgently need to be repurposed for new uses. If the UK’s High Streets and town centres are to be revitalised, this will be an essential part of the process.

In this context, the country’s department and large stores have a massive role to play.

Whether they are going concerns that need to respond to the radically changed world of retailing or redundant stores that are already sitting empty, the scale and location of these assets mean they present unique opportunities.

We strongly believe that this is a socially responsible strategy that through either renewing the viability of stores or repurposing their sites will deliver substantial benefits for the communities in which they are located.

Quadrant Repurpose has been created by Quadrant and Eccleston Capital to work with the owners or operators of these properties.

This document outlines our approach, and we would welcome the opportunity to discuss your department or large store assets with a view to shaping their future strategic direction and unlocking value.

CHRISTOPHER DANIELMARK PHILLIPSON

QUADRANT REPURPOSE

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O U R F O C U S

Quadrant Repurpose is the first specialist venture solely aimed at repurposing redundant department stores and other large retail units across the UK.

Our approach is in response to two trends: the problems within the department store sector and the increasing urbanisation of UK towns and cities. We are seeking to identify assets that have potential for transformation into other uses including residential, hotels, leisure and healthcare.

We also look at where department stores can retain a presence in reconfigured space which better meets the needs of shoppers. This can entail bringing in different uses alongside the retail offer.

We can work with the existing owners of appropriate assets or can acquire assets outright where appropriate.

T H E M A R K E T

The UK has more than 1,000 department stores. These represent a huge footprint in urban locations across the country, and a substantial proportion of these stores are facing the prospect of no longer having a retailing future.

For example, more than 50 former BHS stores remain vacant three years after the retailer ceased trading.

It will not be viable to transform all of those facing redundancy, but Quadrant Repurpose can assess viability and – where appropriate – bring together the expertise and capital which the repurposing process demands from planning through to development.

Owing to the team’s combined experience in this field, Quadrant Repurpose is willing and able to invest significant capital into assets when an appropriate opportunity arises.

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T H E R E P U R P O S I N G P R O C E S S

Repurposing is essentially a development process which first assesses the future potential of an asset and then – if there is a viable strategy – manages the transformation of that asset to a new use.

Quadrant Repurpose manages this process from concept to completion to create new income streams and enhanced capital values from what was a redundant asset.

Depending on the nature of the asset and its economic setting, there may also be scope for retaining a store presence whilst integrating new uses and offers.

Repurposing or adapting stores for a different format of operation requires sourcing and co-ordinating a wide range of expertise. This encompasses a sequence of processes which starts with assessing the store asset and the viability of different strategies.

Once a course of action is agreed, Quadrant Repurpose brings together the project team and manages the project through to completion.

This process entails a broad spectrum of process and expertise including:

• Asset Assessment• Repurposing Appraisal• Development Scope• Appointment of Professional Team• Project Optimisation• Planning • Tendering & Procurement• Construction • Marketing/Pre-lettingR E D U C T I O N I N

I N D E P E N D E N T D E PA R T M E N T S T O R E S

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D E PA RT M E N T S T O R E S : E V O LV E O R E X P I R E

Matthew Hopkinson of CRE strategy and data consultants, Didobi, looks at what the future holds for the UK’s department stores.

For more than a century, department stores have been a significant asset in the UK’s towns and cities. Today, if they are to avoid extinction, they need to reinvent themselves or be repurposed into new uses.

Harry Gordon Selfridge – the founder of Selfridges – famously said: “Excite the mind, and the hand will reach for the pocket”. But in recent times, too many department stores – with some honourable exceptions – have failed to do this. Encumbered with huge legacy property portfolios and under attack from online retailers who can offer the same product diversity which department stores once majored in; the UK’s chains have been effectively painted into a corner. Soaring business rates burdens have been the final nail in the coffin for many.

The last decade has seen some of the greatest changes to the

form and function of retail centres, retailers, brands and consumers. For department stores, the sector has faced a ‘perfect storm’ of increased cost and competition.

Overheads have been driven up by increases in the minimum wage and business rates while

online retailing has brought fierce price competition and a level of convenience which has wooed many shoppers away. In 2009, online retail sales as a proportion of total UK shopping spend was just under 8%. Today, it is more than 21%.

In the face of these relentless pressures, some operators have been reluctant to invest

in their offer while others have been further constrained by meeting the debt servicing costs of being owned by private equity.

These factors have conspired to create a situation where many stores have provided a lacklustre offer which too often has not provided either excitement or value. This has inevitably resulted in store closures. According to The Local Data Company, there are currently more than 1,100 department stores across the UK, but this number is fast-reducing through high profile failures such as Woolworths, BHS, House of Fraser and Debenhams as well as the disappearance of single-store independents in multiple locations across the country.

However, many of the perceived weaknesses of department and other large format stores can also be turned to their advantage. The very fact that they invariably occupy a substantial town centre footprint offers the scope for reshaping or repurposing. The importance of this is underscored by the increasing urbanisation of populations.

After what you might call the ‘Golden Age of Suburban Life’, a rapidly growing number of people are flocking back to urban environments where they can work, rest and play. In the UK, the degree of urbanisation amounted to 83.14% in 2017 versus 80.48% in 2007. This rate of urbanisation is significantly higher than the worldwide average of 54% or the European average of 74%.

Also, the UK population is forecast to grow by 2.5m during the next decade a trend which will support both retail and leisure spending, and also the demand for urban homes.

Against this backdrop, having an asset which has a major in-town footprint can still be a significant plus.

Typical department store floor sizes range from 50,000 sq ft to 150,000 sq ft – although some can be 500,000 sq ft or more – which provides the elbow room for stores to shrink and bring in other uses or be entirely repurposed. Where department stores continue to trade, they need to recapture what traditionally made them successful.

At their best, they were never ‘just shops’ but places of

entertainment, experience and surprise. They provided an excellent opportunity to meet the core needs of consumers who value experience, quality of space and proposition. Today, they have the potential to sit alongside multiple uses be it food, health and well-being, business, homes or hotels. They can also accommodate the growing trend of ‘meantime’ space which creates an ever-

changing offer through pop-ups, events and exhibitions.

Another trend which can favour reimagined department stores is that of retailers wanting to extricate themselves from standalone units and instead opting for ‘stores within stores’. Examples of this include Arcadia co-locating its brands, Argos stores within Sainsbury’s

supermarkets and Paperchase, Hema and Costa Coffee establishing a presence in Next outlets.

Department stores are often imbued with heritage and can have an iconic status in a location. As such, they have a role to play in creating sustainable and vibrant communities in our towns and cities. This process can be assisted by substantial central Government funding which – when combined with lower property costs – could prove transformational for operators.

With investment, innovation and imagination department stores can still have a place on our High Streets. And where this is not viable, they offer a footprint which can accommodate new uses which will make a fresh and major contribution to reinvigorating our town centres.

Matthew Hopkinson is the Co-Founder of Didobi which provides specialist independent advice and consultancy services to retailers, local authorities and real estate professionals.

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Q U A D R A N T

Quadrant Estates is one of the most experienced commercial property asset and development managers in the UK. Since it was formed in 1997, through working with long-standing global capital partners, it has successfully executed transactions worth in excess of £2.5bn and has developed, refurbished and managed more than 5m sq ft of space across all property sectors.

QuadrantEstates.com

E C C L E S T O N C A P I TA L

Eccleston Capital is the new investment and asset management vehicle created by Mark Phillipson who was the former Head of Colliers International’s UK Retail Group and, prior to that, Senior Partner at Briant Champion Long.

He has more than 30 years’ experience as a retail property consultant.

EcclestonCapital.com

MARK PHILLIPSONmphillipson@quadrantrepurpose.com

+44 (0)7850 828 007

CHRISTOPHER DANIELcdaniel@quadrantrepurpose.com

+44 (0)20 7534 7911