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The Changing Face of The Shopping Centre

We continually hear predictions of the 'death of the High Street', but an issue that is of equal concern is the effect the reduction in High Street shops has on other business space. While many businesses have retreated online, others are prepared to confront the challenges of the High Street by adapting their physical locations to attract more customers.

According to the Financial Times, in 1971 half of the population shopped for non-food items in about 200 separate locations. Today, half go shopping for similar goods in around 90 locations. Perhaps consumers are becoming less worried about shopping around and choice  and want the convenience of having all of their options in one place. This desire for a 'one stop shop' presents an opportunity for non-retail businesses to profit from. Restaurants, cafes, bars and leisure service providers have all looked to relocate to space within retail centres to create and benefit from a whole-day shopping experience.

Some of the benefits for businesses operating in focussed areas for retail such as shopping centres are obvious. The infrastructural advantages that being part of such a location brings means shopping centre owners are able to manage their spaces strategically and can prevent the issues that arise in traditional high street locations, whereas the majority of high street shops can suffer as a result of the fragmented ownership of underlying freeholds. Conversely, a shopping centre under one ownership is able to utilise the management of its space collaboratively, providing effective locations for new initiatives and 'pop-up' businesses.

Hospitality and leisure sector businesses are able to take advantage of such opportunities, and provide innovative new experiences that can compete with the online market, rather than being relegated to a High Street  'graveyard'. Landlords, on the other hand, must remain alert to the changing nature of shopping centres, and ensure that lease terms are aware of the changing uses of space. It  is beneficial, for example, for landlords to be prepared to offer more frequent break clauses to enable space to be used dynamically and keep up with changing consumer expectation.

Moves are being seen by progressive retailers, such as Made.com, to alter the whole concept of stores, towards showcasing rather than selling products. This develops the concept first introduced by retailers such as IKEA who offer more than a simple retail space, and loyal followers who will go to their stores simply for the experience (or maybe, in IKEA's case, the meatballs). Innovation is essential to counter e-commerce.

Shopping centres, must therefore rise to the challenges and create 'whole day' experiences to attract and keep the consumer interested for the whole day. Consumer surveys reveal that 79% of people agree that the largest shopping centres ought to adopt a mix of 50% eating, drinking and leisure use, and 50% retail. Similarly, research by shopping centre firm ECE indicates that 40% of its visiting consumers choose a shopping destination based on the available dining options.

There are issues for both landlords and tenants where non-retail businesses look to move into locations that have traditionally focussed on pure retail. Service charges tend to be higher for food service and leisure operators than more traditional retailers due to the additional space required, longer trading hours and higher operational charges. While higher service charges may be acceptable to nationally operating chains, smaller independent stores (looking to expand into the shopping centre market) may not be so well placed to bear such increased costs. A risk here for landlords is that the imposition of  high service charges discourages small businesses, therefore limiting the diversity within food, leisure and retail that consumers clearly desire.

The changing face of shopping centres, and other focussed areas of retail and non-retail space, creates opportunities for businesses to adapt and stay ahead of the increasing demand for an exclusively online presence. Businesses must remain alert to change and be flexible, whether in procuring bespoke agreements with landlords to suit developing needs (or making better meatballs), and the desire for change forced upon them by the consumers.

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