Landlords should take on more risk and do things differently in the wake of Covid-19 to transform “homogenised” high streets, says Shaftesbury CEO
Landlords should become more flexible and be receptive to tenants’ needs in response to structural changes facing Britain, according to Shaftesbury’s chief executive.
Speaking to Blackstock Consulting’s Andrew Teacher in our new BossCast series, Brian Bickell says the pandemic is accelerating changes to the landlord-tenant relationship that were already underway across the retail and leisure sectors — which could see the likes of Soho reclaiming some of the grit and glam it was renowned for before the West End’s rapid commercialisation.
“Customers want flexibility, shorter leases, risk-sharing via turnover rents and all sorts of things,” says Bickell, who is this year celebrating 35 years at the FTSE-250 firm. He added: “They are looking at utilisation of space differently than the industry did 10 to 15 years ago.”
Covid-19 was an unprecedented “black swan event that no-one had ever really talked about”, says Bickell, which ushered in the first-ever complete closure of the West End. With retail, leisure and hospitality tenants accounting for roughly 70% of its portfolio, the impact was especially stark for Shaftesbury.
“Shops and restaurants and cultural attractions will come back over time — but there will be some long-term scarring,” says Bickell.
“There are positives, and we’ve seen the alfresco dining scheme can work - we’ve tried to explain to the city council that if people know it can have a bit more longevity, people will invest and make it a better experience and manage it properly.”
With such a high proportion of its tenants operating in sectors that were hardest-hit by Covid-19, Bickell maintains that Shaftesbury’s mantra is “if they don’t make money, we won’t prosper”. His progressive thinking has astutely steered the business through multiple downturns over the years.
He adds: “Occupiers have to create the buzz and excitement in these envelopes of space. With the best will in the world, I wouldn’t trust a bunch of property and financial people to create exciting experiences inside buildings!”
“We need to engage with those people who can do that and do it successfully to create that ambiance. We’ve always looked at it as more of a partnership.”
Working towards a mutual benefit was already transforming the tenant-landlord relationship before the outbreak of Covid-19, but as Britain’s high streets get back on their feet Bickell argues that landlords will need to be a “little more risk-embracing” when selecting potential tenants.
He says: “We do that; when people come to us with a good idea, we’re not obsessed with a balance or whatever, our view is “this looks like it’s going to be good, we’ll give it a try, we’ll support them.”
“But, be realistic as well, not everything you try is going to work. If we haven’t tried things, we’re not going to move on in the way that creative people are always moving on by trying things.”
“Those with retail exposure have got to be prepared to take more risk and accept that things will change more quickly. Things like long leases and reliable covenants are not really there any more for these sectors, so you‘ve got to take more risks and be a bit more adventurous.”
“This is really the answer to get away from the homogenised high streets and predictable offers — that will get people out and young people will find that much more engaging moving forward.”
Our next BossCast interview will feature Eastdil chair and former Credit Suisse chair of European real estate investment banking, Ian Marcus.
Listen to previous episodes in the BossCast series:
- BossCast Episode 1: Mark Allan, Chief Executive of Landsec
And revisit PropCast’s recent ESG series:
- ESG Series Episode 1: Aviva Investors
- ESG Series Episode 2: Elementa Consulting & Hawkins\Brown
- ESG Series Episode 3: A/O PropTech, Plentific & Notting Hill Genesis
- ESG Series Episode 4: Sound Diplomacy, SeerBridge & Kensington & Chelsea Art Week