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Shopping centres face obsolescence, warns JLL
Published:  29 September, 2011

In the latest chapter of its Retail 2020 research, Jones Lang LaSalle warns that up to 30 per cent of retail space in developed markets is potentially obsolete in its current form

And the agent also cncludes that up to 15 per cent of shopping centres could be unsellable from 2018 in certain markets.

Guy Grainger, head of UK Retail at Jones Lang LaSalle said: “Every stock-building cycle or quarterly rent demand drives struggling retailers closer to –or over – the edge. Meanwhile landlords’ patience in keeping retailers from insolvency is being stretched to the limits.”

James Brown, head of EMEA retail research at Jones Lang LaSalle, added: “Looking across Europe, despite there being some significant disparities in individual country and city performance, the overall outlook for economic growth to 2015 is bleak. To some extent, whether a country has been affected by political, economic or social unrest is irrelevant: the European consumer mood is fragile and spending will continue to be weak as austerity measures continue to bite.”

“It is therefore crucial that shopping centre owners and retailers put a clear strategic plan in place to weather the storm and ensure that when conditions improve, which they will, they are at the forefront of the upturn.”

The research captures and analyses the practical consequences of predicted retail trends in five key lessons for retailers and investors:

1. Approach technology as a mind-set, not merely a tool: There is no bigger disruptive force in retail today. It effects everything from channel strategy, pricing lease arrangements to communicating with consumers. Retailers and landlords need to stop seeing the internet as an external competitor and instead incorporate it into their make-up and adjust their business models accordingly

2.Sustainability is a big risk, but also an opportunity for retail investors: Quality new build shopping centres will offer a green premium. A well-designed and managed centre should be more cost effective to run with rental levels less likely to be discounted. Ensuring a centre is demonstrably more efficient will make it more attractive than its non-green neighbour and easier to sell down the line.

3.Upskill, partner and diversify to survive:Those with capital will increasingly need to turn to specialist owner managers whose influence will expand rapidly. Skill gaps will increase. This is particularly important for development and regeneration, considering how much of our retail stock is reaching or has reached obsolescence.

4.Get them and keep them: The fundamental basic of retail principles. For the majority of shopping centres, marketing is for the most part underplayed and often poor. Retailers and landlords need to upskill to create winning differentiated destinations which let customers know you are there, keeping them interested and ultimately spending.

5.Quality and true convenience: The nature of globalisation,of instant electronic communications, of ultra-mobility will transform retail into a world of extremes – best leisure, super dominant offer, regional catchments and highest design. The customer expects more and if your retail offer or retail property does not provide this, they have options to go elsewhere.