5Qs for Matt Soffair on how the UK’s coping with COVID-19
In the United Kingdom, store shutdowns commenced in March, but the wearing of masks was not mandated. That changed recently when, after a relaxation of shutdowns and social distancing standards, daily case reports rose from 500 a day to 750. Legal & General Investment Management is the owner of more than $40 billion worth of commercial real estate in the U.K. and we had the chance to speak with the company’s retail research manager, Matt Soffair, to find out how the crisis has altered the course of retail there.
As the owner of several major shopping centers in Britain, how has COVID changed your approach to sustainability and environmental concerns?
Long before COVID, sustainability had been a key focus for us. We had established a goal of net-zero carbon emissions by 2050, so a lot of our projects had already moved to lower carbon emissions. There are some other real opportunities COVID presented to us, though. First and foremost, how consumer travel has changed. People are shopping more locally, and they’ll walk or cycle to our centers, so we are looking into taking away some parking areas and creating more bike storage facilities. We also envisage a transition to more electric cars, so there will be more charging facilities on-site.
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Have you noticed major changes in how consumers are using your facilities?
There will be a shift to centers with more spaces to live, work, and play. That is really a key emphasis for us as owners. Gathering spaces are becoming more and more important. People are shopping less frequently, but buying more. They’re shopping more locally at High Street stores instead of regional malls. Historically, we’ve focused a lot on the stores. In the future, the focus will be on how stores will engage with the public realm.
What special precautions are you taking for employee and consumer safety as shopping centers begin to re-open in the U.K.?
The safety of employees is front and center for us, making sure they have safe surroundings and the correct gear. As in the U.S., we’ve been working on capacity limits and queue control. We’re making sure there is deeper cleaning being done. There’s a balance to maintain between making people feel safe as well as providing a satisfactory shopping experience. Some consumers have been comfortable coming back to centers early on, but we have to work on getting all consumers to view the shopping center as a comforting place.
How are you addressing the difficult financial situations being faced by your tenants?
The biggest effort for us has been transparency and communication. We need financially successful businesses in our centers, so we’ve worked out payment plans and helped them with their cash flow issues. The government established a program that will pay up to 80 percent of employees’ wages until October. Businesses have also received property tax relief of one year, and retail businesses are protected from being evicted through the end of September. Retailers can get recovery or bounce-back loans and use them to pay rent.
Do you envision making changes at your properties that you hadn’t anticipated prior to the pandemic?
Yes, there are three key areas. First, we need to take greater control over our environment. We need to have a closer relationship with the consumer than we have had in the past. The second area is making sure we create spaces for emerging brands—the digital businesses that have done well during COVID. And the third thing we really need to focus on is making sure that, as shopping center owners, we diversify our revenue streams to capitalize on our audience. We need to modify property use with work spaces and health services, for instance. We’ve launched a flexible partnership model for leasing that can help startups to establish themselves as national brands. They can rent flexible-term, pre-fitted spaces or they can pay a share of their revenue as rent.