BTR – The New Anchor Tenant

September 2019

In recent articles, we have looked deeply into the BTR sector in some analytical detail. We have also shown how BTR can act as a strong catalyst to broader urban redevelopment. But in this piece, we consider how modern Build to Rent residential development can potentially help alleviate one of the pressing urban dilemmas of today; the decline of the traditional high street and shopping centre.

 

The demise of the high street is ‘internet linked’, with the decreased need to leave home and purchase goods. Can this loss of footfall, by having more people living centrally, close to or on top of the high street, create a new demand; albeit, potentially more orientated towards leisure and A3 uses?

 

Can residential become the new “anchor"?

 

For the last 50 years, the successful development of retail investments has been predicated on securing a big name retailer to act as a magnet, sitting in the centre or, better still, at either end of the high street or mall to attract customers. These "anchor" tenants drew crowds and created footfall for the benefit of the centre as a whole.

 

But the internet is putting pay to the old norms as goods are readily available, often more cheaply, online; why make that arduous journey to the shops?  See this in the context of the societal shift in the young from materialism to the desire for experience and you understand why the last 20 years has seen the growth in the catering, entertainment and leisure components of successful high streets and shopping centres. 

 

Where can retail go next to support dramatically declining in-store sales? Sure, more focus on the experience can help, but it comes at a price and not universally welcomed. Shopping centre landlords pass on any entertainment costs back to the retailers through the service charge, yet does the footfall generated by entertainment result in actual sales? Unfortunately, it’s not always the case.

 

Lateral thinkers are, therefore, now looking outside of the retail "box". Anchors were about footfall but what if we deliver that activity another way? Why not bring the consumers to the retailers by creating homes for them in the very vicinity of the stores?

 

The ‘death of the mall’ and the turn to Build to Rent has been a trend in the US for a while now. Global Apartment Advisors, whose build to rent roots originate from the US, has seen this become an established real estate play. Once-tired districts are being uplifted with new homes and crucially, the retail offer is being curated to the residents above, thus servicing both their needs but also the wider community too.

 

 

BTR avoids the pitfalls of “For sale" residential.

 

Tarnishing shiny retail Investments with problematic homeowners over them has been avoided like the plague in the past, and only incorporated when the planners demand it. Residents with gripes and moans and, more importantly, legal rights to hinder development and change have been kept far away from prime retail assets. But modern residential investment, in the guise of BTR, delivers active consumers with a vested interest in a vibrant community but with no individual frustrating-mechanism to scupper progress. In fact, if not actually the same investor, the owner of the residential investment will share similar aspirations for the vitality of the collective built environment as the retail investor.

 

So, once again, BTR avoids some of the pitfalls of earlier residential investment formats. But just like putting a shop at the base of residential development is no guarantee of its success, putting people above a shopping centre doesn't automatically create footfall and needs sensitive planning. This includes careful consideration of resident journeys but a revised outlook on the retail offer to provide an appropriate retail amenity that genuinely services the local area.

 

As GAA notes, from a development and funding perspective, the retail component of a project is becoming an ancillary use and the need to have blue-chip covenant strengths from your retail occupiers is no longer crucial. With residential income so sought after by institutional capital, and that income making up say 90% of the total rent roll, there is scope to allow less well known and local brands to move in, providing ever more authenticity and vibrancy to a neighbourhood.

 

The shop window effect will become ever more important

 

These guys don't even need to spend their cash in the store. Increasingly the shop window will become exactly that; an introduction to the goods of a company that is agnostic to where the purchase actually takes place - in-store or online. It has recently been reported that The White Company had opened a new store in Newcastle which traded ok but which drove an increase of 80% in associated local online sales. 

 

This all helps great “placemaking”

 

Realise too that all these additional people will also want entertaining, feeding, educating and access to leisure facilities which don't have to be in their own residential building, nor be exclusive to residents. They will support a more vibrant, holistic, urban environment, one which operates both during the day and the evening, unlike the often monoculture high streets and shopping centres of recent years.

 

These newly created hubs naturally serve the wider community too and so become a new feature to the cultural tapestry of the high street.

 

Your bottom line benefits too

 

This is all very good news for the currently beleaguered retail investor. BTR both acts as a catalyst to improved retail performance but is a very valuable asset in its own right adding to their pressurised bottom line, if developed effectively.

 

This latest chart from investment market analysts, Real Capital Analytics (RCA) shows that residential investment is gaining in appeal, in direct contrast to the waning of the retail market, and underpins new spending in the sector.

 

 

 

...and some are already profiting

 

One of the largest projects announced so far is the upcoming £245 million development of the Harvey Centre in Harlow town centre. Addington Capital and Tristan secured planning permission  to provide 447 new homes and have sold the investment on to Strawberry Star Group.  A substantial part of the centre will be demolished and four new buildings will be constructed, ranging from 3 to 16 storeys, arranged around landscaped public spaces to provide open-air boulevard shopping. Addington and Tristan’s bold move, swopping retail space for residential, demonstrates the thinking lying behind the trends shown in the RCA findings.

 

A further example is New River securing permission to develop 227 units in Cowley, Oxfordshire at their 1960’s-built Templars Square shopping centre. They have identified the need to upgrade the centre but also the opportunity to meet the demand for new homes in Oxford and add much-needed choice of restaurants and hotels. They will rationalise the existing car parking and use airspace above the centre.

 

Hammerson is using permitted development rights to deliver new residential from former office space at Cabot Circus and Broadmeads, Bristol, as PLATFORM_ have done in Crawley town centre where an existing office building has been repurposed to deliver 185 units.

 

Spread the word...BTR is good for your local town centre

 

GAA, believe that regional town centres can have a viable future and generate strong returns with a collaborative approach between residential and commercial.  They argue that this has hitherto never been possible with the traditional “for sale” model for residential.  They aim to increase the awareness of owners and investors and to demonstrate to Councils why they should positively support Build to Rent, both at the Local Plan making and scheme decision making stages. 

 

At Geraghty Taylor we are actively involved in schemes to integrate BTR into existing assets as well as developing new assets in existing retail environments. We see this as a welcome development in creating rejuvenated town centres.

 

Create differently

 

#BTR #BuildtoRent #Brand #Brandbeforebuilding

 

 

Our thanks go to Dominic Martin of Global Apartment Advisors, (GAA) for his input into the preparation of this article.

 

 

In recent articles, we have looked deeply into the BTR sector in some analytical detail. We have also shown how BTR can act as a strong catalyst to broader urban redevelopment. But in this piece, we consider how modern Build to Rent residential development can potentially help alleviate one of the pressing urban dilemmas of today; the decline of the traditional high street and shopping centre.

 

The demise of the high street is ‘internet linked’, with the decreased need to leave home and purchase goods. Can this loss of footfall, by having more people living centrally, close to or on top of the high street, create a new demand; albeit, potentially more orientated towards leisure and A3 uses?

 

Can residential become the new “anchor"?

 

For the last 50 years, the successful development of retail investments has been predicated on securing a big name retailer to act as a magnet, sitting in the centre or, better still, at either end of the high street or mall to attract customers. These "anchor" tenants drew crowds and created footfall for the benefit of the centre as a whole.

 

But the internet is putting pay to the old norms as goods are readily available, often more cheaply, online; why make that arduous journey to the shops?  See this in the context of the societal shift in the young from materialism to the desire for experience and you understand why the last 20 years has seen the growth in the catering, entertainment and leisure components of successful high streets and shopping centres. 

 

Where can retail go next to support dramatically declining in-store sales? Sure, more focus on the experience can help, but it comes at a price and not universally welcomed. Shopping centre landlords pass on any entertainment costs back to the retailers through the service charge, yet does the footfall generated by entertainment result in actual sales? Unfortunately, it’s not always the case.

 

Lateral thinkers are, therefore, now looking outside of the retail "box". Anchors were about footfall but what if we deliver that activity another way? Why not bring the consumers to the retailers by creating homes for them in the very vicinity of the stores?

 

The ‘death of the mall’ and the turn to Build to Rent has been a trend in the US for a while now. Global Apartment Advisors, whose build to rent roots originate from the US, has seen this become an established real estate play. Once-tired districts are being uplifted with new homes and crucially, the retail offer is being curated to the residents above, thus servicing both their needs but also the wider community too.

 

 

BTR avoids the pitfalls of “For sale" residential.

 

Tarnishing shiny retail Investments with problematic homeowners over them has been avoided like the plague in the past, and only incorporated when the planners demand it. Residents with gripes and moans and, more importantly, legal rights to hinder development and change have been kept far away from prime retail assets. But modern residential investment, in the guise of BTR, delivers active consumers with a vested interest in a vibrant community but with no individual frustrating-mechanism to scupper progress. In fact, if not actually the same investor, the owner of the residential investment will share similar aspirations for the vitality of the collective built environment as the retail investor.

 

So, once again, BTR avoids some of the pitfalls of earlier residential investment formats. But just like putting a shop at the base of residential development is no guarantee of its success, putting people above a shopping centre doesn't automatically create footfall and needs sensitive planning. This includes careful consideration of resident journeys but a revised outlook on the retail offer to provide an appropriate retail amenity that genuinely services the local area.

 

As GAA notes, from a development and funding perspective, the retail component of a project is becoming an ancillary use and the need to have blue-chip covenant strengths from your retail occupiers is no longer crucial. With residential income so sought after by institutional capital, and that income making up say 90% of the total rent roll, there is scope to allow less well known and local brands to move in, providing ever more authenticity and vibrancy to a neighbourhood.

 

The shop window effect will become ever more important

 

These guys don't even need to spend their cash in the store. Increasingly the shop window will become exactly that; an introduction to the goods of a company that is agnostic to where the purchase actually takes place - in-store or online. It has recently been reported that The White Company had opened a new store in Newcastle which traded ok but which drove an increase of 80% in associated local online sales. 

 

This all helps great “placemaking”

 

Realise too that all these additional people will also want entertaining, feeding, educating and access to leisure facilities which don't have to be in their own residential building, nor be exclusive to residents. They will support a more vibrant, holistic, urban environment, one which operates both during the day and the evening, unlike the often monoculture high streets and shopping centres of recent years.

 

These newly created hubs naturally serve the wider community too and so become a new feature to the cultural tapestry of the high street.

 

Your bottom line benefits too

 

This is all very good news for the currently beleaguered retail investor. BTR both acts as a catalyst to improved retail performance but is a very valuable asset in its own right adding to their pressurised bottom line, if developed effectively.

 

This latest chart from investment market analysts, Real Capital Analytics (RCA) shows that residential investment is gaining in appeal, in direct contrast to the waning of the retail market, and underpins new spending in the sector.

 

Click above to view a larger image...

 

 

...and some are already profiting

 

One of the largest projects announced so far is the upcoming £245 million development of the Harvey Centre in Harlow town centre. Addington Capital and Tristan secured planning permission  to provide 447 new homes and have sold the investment on to Strawberry Star Group.  A substantial part of the centre will be demolished and four new buildings will be constructed, ranging from 3 to 16 storeys, arranged around landscaped public spaces to provide open-air boulevard shopping. Addington and Tristan’s bold move, swopping retail space for residential, demonstrates the thinking lying behind the trends shown in the RCA findings.

 

A further example is New River securing permission to develop 227 units in Cowley, Oxfordshire at their 1960’s-built Templars Square shopping centre. They have identified the need to upgrade the centre but also the opportunity to meet the demand for new homes in Oxford and add much-needed choice of restaurants and hotels. They will rationalise the existing car parking and use airspace above the centre.

 

Hammerson is using permitted development rights to deliver new residential from former office space at Cabot Circus and Broadmeads, Bristol, as PLATFORM_ have done in Crawley town centre where an existing office building has been repurposed to deliver 185 units.

 

Spread the word...BTR is good for your local town centre

 

GAA, believe that regional town centres can have a viable future and generate strong returns with a collaborative approach between residential and commercial.  They argue that this has hitherto never been possible with the traditional “for sale” model for residential.  They aim to increase the awareness of owners and investors and to demonstrate to Councils why they should positively support Build to Rent, both at the Local Plan making and scheme decision making stages. 

 

At Geraghty Taylor we are actively involved in schemes to integrate BTR into existing assets as well as developing new assets in existing retail environments. We see this as a welcome development in creating rejuvenated town centres.

 

Create differently

 

#BTR #BuildtoRent #Brand #Brandbeforebuilding

 

 

Our thanks go to Dominic Martin of Global Apartment Advisors, (GAA) for his input into the preparation of this article.