UK property veterans Christopher Daniel and Mark Phillipson have joined forces on a new venture to revitalise sizeable retail assets across the country.
Quadrant, the UK real estate asset management and development company, has teamed up with Eccleston Capital to launch the first single-purpose venture aimed at repurposing redundant department stores and other large retail units across the UK.
The new enterprise – Quadrant Repurpose – will identify assets which have potential for transformation into other uses including residential, hotels and leisure. It will also pinpoint where department stores can retain a presence in reconfigured space which better meets the needs of shoppers. This could entail bringing in different uses alongside the retail offer, the company said.
UK commercial property asset and development manager Quadrant was formed in 1997. It has partnered on transactions worth in excess of £2.5 bn and has developed, refurbished and managed more than 5 million ft2 of space across all property sectors.
Eccleston Capital is the new investment and asset management vehicle created by Mark Phillipson who, through his work with Colliers International and Briant Champion Long, has more than 30 years’ experience as a retail property consultant.
Quadrant’s founding partner, Christopher Daniel, commented: 'It’s clear that huge swathes of redundant retail property urgently need to be repurposed for new uses. If the UK’s high streets and town centres are to be revitalised, this will be an essential part of the process.'
He continued: 'Our track record of developing and maximising real estate across the retail, office and residential sectors gives us the perspective and expertise to manage the complexities of repurposing. Coupled with Mark’s extensive retail consultancy experience, this is a compelling offer at a time of significant need.'
The venture will work with the existing owners of appropriate assets or acquire assets outright.
Phillipson commented: 'The UK has more than 1,000 department stores. These represent a huge footprint in urban locations across the country, and a substantial proportion of these stores are facing the prospect of no longer having a retailing future. For example, more than 50 former BHS stores still remain vacant nearly four years after the retailer ceased trading.
‘It will not be viable to transform all of the stores facing redundancy, but Quadrant Repurpose can assess viability and bring together the expertise and capital which the repurposing process demands from planning through to development.'
Phillipson confirmed that the duo had started work on its first two projects, both department stores in the South East of England which are currently trading. ‘One of them is shaping up into a fairly straightforward conversion into residential,’ he said, ‘while the other will probably become a mixed-use scheme.’
Taking into account the UK’s current department store stock, Phillipson said that ‘significant numbers’ of properties were ‘unlikely to survive as they stand’.
‘Most of them are being inefficiently used,’ he noted. ‘The occupiers now don’t need all the space they have, which is now under consideration as a result of the rapid evolution in the sector. Traditional department stores can be between 50,000 and 500,000 ft2, but most don’t need more than 40,000-60,000 ft 2 these days.’
In terms of consulting on a department store’s future, Phillipson said that Quadrant Repurpose was taking a bespoke approach. ‘There’s no standard equation,’ he explained. ‘A lot of it depends on the nature of the local demographic. The potential local spend governs how many potential alternative uses could suit the location, and how profitable the development could be.’
Confirming the trend for mixed-use developments, Phillipson said that profitability considerations would tend to drive the composition of each project.
‘You need to be securing resale values for residential real estate of circa £350 per ft2, as converting a project into homes can cost up to £250 per ft2 and above,’ he said.
‘Similarly, with hotel development, the viability of a project is borderline if the accommodation is worth approximately £5000 per annum per key. A lot of department stores are quite solidly built period buildings, but the strip-out costs can be high. So all these factors need to be considered.’
However, he confirmed that the sheer size of many existing department stores was what made their potential so exciting. ‘if you have a 200,000 ft2 department store you can potentially introduce a lot of different combinations,’ he said. ‘A 100-room hotel would need approximately 35,000 ft2. If the retailer chooses to downsize and stay in the property, there is still often room for at least two other uses.’
With the modern living trend opening up investor appetite for alternative structures ranging from co-working spaces to senior living, Phillipson said that there was a big buzz around their initiative.
‘This is really good for town centres,’ he said. ‘The kinds of repurposing projects we are proposing are in line with the growing trends towards urbanisation. Each store allows us to put together a jigsaw based on commercial values, site potential, and other kinds of opportunity. It’s up to us to come up with the right combination.’
However, he underlined that Quadrant Repurpose’s raison d'être didn’t mean that department stores were doomed. ‘It’s just like the rest of the retail trade – there are some very good players and others which are struggling. Look at the top retailers – like Primark, JD Sports or Next. They’re generating a lot of good news at the moment. In the department store stakes, Selfridges is a wonderful example. You can’t put a Selfridges in every city, but the industry has a lot to learn from those who are leading the experiential trend.’
Overall, he said that landlords and retailers seemed to want to get involved in the conversation. ‘The interest that we have received so far is amazing,’ he said. ‘Our timing has been good and we’re very excited about the prospects that are emerging. Our challenge is to convert some of these opportunities. We can’t wait to get stuck in.’