Minding the Aspiration Gaps

A pre-occupation with quantum of floorspace has all too often ridden roughshod over the far more pressing concern as to whether that floorspace is fit for longer term purpose. Retail has its own ‘quality vs quantity’ conundrum.

Stephen Springham – Head of Retail Research

Population growth spurs demand and more supply

Greater London’s population is estimated to grow at an annual average rate of 0.5% over the next 20 years according to GLA forecasts. This may not sound a rampant rate of growth, but cumulatively it adds up to a population growth of 10.6% over the next two decades, an increase of 956,000 people in absolute terms, taking the overall figure tantalisingly close to 10m.

From a retail perspective, population growth is, of course, a positive dynamic. More people = more spend. More spend = more retail floorspace required. But is it really that simple? And can population growth truly be understood in splendid isolation from demographic trends?

The established retail capacity model that provides a framework for retail development across the country only factors in the basic ‘population growth = spend growth = floorspace need’ and is therefore divorced from many of the realities of modern-day retailing. Yet Local Authorities remain wedded to it in formulating local plans.

Take, by way of dated example, the last published ‘Consumer Expenditure and Comparison Goods Floorspace Need in London’ report on the Mayor of London / London Assembly website. The report highlighted a baseline scenario where, by 2041, there was a need for 30.3m sq ft of gross additional comparison goods floorspace, over and above current supply and pipeline developments of 17.6m sq ft. That’s the equivalent of a further 12 extended Westfield London schemes. It’s a headline takeaway from a hugely detailed 135-page report, but we can safely say, the last thing London needs is 30m sq ft of retail floorspace, on top of what it already has.

Addressing demographic changes

Demographic trends are far more multi-dimensional and influential on the capital’s retail footprint. Multiple volumes could be (and have been) written on the changing face of London socioeconomics over time, but for the sake of brevity, there are two fundamental moving parts. First, the influx and outflow of new demographic groups that profoundly change the social make-up of an area. Secondly, the social evolution of ‘indigenous’/long-standing residents and the resulting changes in their demands and aspirations.

These two moving parts are often intertwined. A vast over-simplification, but in the context of London, they often play to the same tune: increased affluence, higher spending power, raised consumer demands and more elevated expectations. Gentrification may be an evocative word, but it is also a reality in virtually all areas of the capital, to a greater or lesser degree.

Changing demographics are seldom a revolution. The process evolves over many years. But slowly and surely, it can create a fault line between retail supply and demand. While the social profile and potential customer base of an area may have morphed dramatically over time, the local retail offer has often changed very little and there is consequently a serious mismatch between the two, leading to consumer spend migrating elsewhere – or simply remaining ‘unspent’ in the ether.

Nice catchment, shame about the retail

There are a host of data-rich methodologies we can employ to quantify and qualify inconsistencies between demographics and retail provision. One of the key ones is to juxtapose CACI’s ACORN data (which classifies and segments the entire UK population into five categories/17 groups/59 types based on a multitude of socio-economic and behavioural feeds) and retail mix breakdowns (‘Value vs Mass-Market vs Premium’).

In a perfect world, centres, and areas with high penetrations of the most aspirational ACORN Categories of ‘Affluent Achievers’ and ‘Rising Prosperity’ will be matched by a ‘Premium-heavy’ retail proposition. The reality is that these two sets of stars rarely align. And when they do, it tends to be in higher profile Central London locations such as Knightsbridge, Marylebone High Street, Covent Garden, or the King’s Road. Away from these elite locations, the picture changes dramatically. Some of the largest mismatches within London are listed below.

The property implications

Rather than seek to build the next Westfield scheme, the retail opportunity in London lies more in regenerating and reengineering existing stock and aligning it to the demands of its local audience. More by default than design, most people were forced to shop locally during COVID-enforced lockdowns. Clearly this was a positive trend, but only if it proved a sustainable, long-term one, rather than a passing fad. It is obviously proving more ‘sticky’ in areas where there is a better balance between the quality of supply and consumer demand. Where this is not the case, consumers are likely to revert to old habits rather than those adopted during the dark days of lockdown.

There is no blueprint or ‘one size fits all’ strategy for these retail regeneration projects. While we have talked largely in very generic terms in this high-level assessment of demographics and retail mix, the on-the-ground reality is far more nuanced. Each London retail centre is very different, with its own story to tell and future to forge. By extension, the optimum nature of the regeneration will also vary considerably and will be very tailored to the local community. What works in one area may not be appropriate in another. Above all else, we are not simply advocating shoehorning in a plethora of upscale designer brands into a local setting – bridging the gap entails so much more than this.

Of course, let’s not pretend any of this is easy. Indeed, it is (or certainly was) more straightforward to develop a whole new shopping centre from scratch than it is to successfully re-engineer and effectively retrofit large elements of London’s fabric. A key barrier to many of these potential retail regeneration projects will be ownership structures. Ownership of a shopping centre gives control over a large asset and makes its curation relatively easy. But parades and streets of old high street stock tend to be the mainstay of most London centres, and these tend to fall under fragmented ownership. Only through common ownership are the necessary changes likely to be implemented.

Future town centre regeneration schemes are unlikely to be led by retail or any one particular use type. The future template harnesses the essence of mixed use schemes which incorporates a more holistic approach to amenity provision. This results in the workplace being the focal point so that amenity provision is aligned with office occupier requirements.

Schemes at Paddington Square and Battersea PowerStation are recent examples of this evolving approach to retail amenity provision in London’s new business districts. The latter is the subject of our first case study of retail development in London.