Asset managers must take a more proactive approach in order to deliver income and value to investors, according to asset manager Lawrence Hutchings, director of UK Shopping Centre Investment at Hammerson.
Hutchings, speaking today at retail property organisation BCSC's Shopping Centre Management Conference in Liverpool, outlined the implications of the current economic downturn on the industry, including lower capital values, stress on loan covenants, and reduced access to capital. This has resulted in a period of 'capital conservation' – typified by more conservative cost management and more flexible leasing regimes.
Hutchings said: "Asset and centre managers must now deliver stronger and more dynamic management and marketing techniques, and consider alternative forms of income or measures to fill voids such as temporary lettings.
"Close collaboration between the asset and the onsite centre management teams is crucial, and will enable them to identify the pressures and respond accordingly. Footfall, vacancy rates, and sales figures will differ from centre to centre, and the business plan for each should look to address the most prevalent issues. This applies to the larger schemes as well as the smaller centres," he added.
Hutchings also focused on the need to look at opportunities with existing retailers. He commented: "Not all retailers are being hit by the crunch and more and more are looking to 'right size' their units. As part of retail audits, asset managers must grasp opportunities where they can – offering expansions or re-locations for those who continue to thrive."
The Oracle in Reading was highlighted as an example of successful asset and centre management to attract new tenants. In this case, adjusting the catering offer to better match customer profile by bringing in Giraffe and Las Iguanas. Mall commercialisation is also a growing area – Hutchings pointed to the introduction of the Nut Hut concept at Brent Cross – initially brought in for a six-month trial, but which now generates additional revenue of £80,000 per annum for a single fixed kiosk.
Hutchings concluded: "Right now we are seeing a flight to quality – the dominant centres in our larger towns and cities will continue to outperform the weaker centres – and so it is even more important that they up their game in order to compete and succeed."
James Max, LBC Radio presenter and BBC's The Apprentice runner-up, spoke earlier today on the impact of the credit crunch on UK business. He echoed the emphasis on teamwork and the need to focus on the customer: "There are clear signs that people are still spending money, but they are being far more selective in their purchases. You do not need to spend excessive amounts of money, but finding out what your customer wants is crucial.
"With good market research in place, it is your role as owners and centre managers to respond to this intelligence, reinventing where necessary and ensuring that your retail offer and tenant mix match your customer profile and are effectively communicated to that target audience."