The Future of Place

Alex McCulloch, Director of CACI, reveals the five pillars for understanding placemaking in the future.

First published in CoStar on 2 March 2022

If you have been reading my thoughts and have been so enthused by the first two – on the future of neighbourhood centres and offices – that you find yourself here to drink in a third, thank you for staying with me. This one concludes the series and is where I’ll be divulging CACI’s Holy Grail: our five pillars of success to understanding the future of place.

Our places will evolve to suit their communities and will become engaging, exciting and fun locations, where residents want to reside, workers want to work, and visitors want to visit. With an open mindset, a deep understanding of existing and potential customers, and the right support, owners of those spaces can retain and grow asset value.  Fail to do so, however, and they will be left behind. Landlords that take note at this point, adopting our five pillars of success, are likely to succeed in keeping up with the future of place. 

So, let’s get stuck in with our first pillar: stability of income. Long-term investors need a stable income stream to provide a solid baseline for valuations. While it is tempting to chase space retention through turnover only leases, most assets need to start exploring a change in use. Landlords need to home in on the off-pitch space (think unsuitable-for-retail second floors, storage areas and under-used car parks) and draw up proposals for converting into alternative uses. 

A long-term lease, albeit for lower rent, will utilise otherwise dead space and provide a foundation of secure income and value. This takes me back to my previous piece on The Ideal Destination and how future places require strategies that essentially have rose-tinted realism. In the same way that ridiculous, unsupported propositions should not be chased, neither should lazy or unrealistic ones. Have a well-considered strategy and list of targets that are achievable, but which still inspire.  And please have the discipline to stick to it – changes in strategy often take at least 2 (and up to 5 years) to filter through to meaningful leasing that is noticed by customers and change their behaviour.

Pillar two: diversity of occupier. I hope by now we have all accepted that traditional shopping centres have become over-spaced in terms of retail, so it should be no surprise I am advising you to focus on having a diverse tenant mix. Think differently: it could be laundrettes, florists, maker space, creative workshops, health services. Add in some new wave leisure concepts, particularly those that can diversify your customer base for that additional layer of security. 

Take Gravity at Southside Wandsworth – they have placed an electric go-kart track at the heart of the centre and utilised the central atrium of the old Debenhams to provide level changes for the track. Alongside a huge array of arcades, AR, VR, bowling and darts, there are also street food and bars on offer, all of which are underpinned by copious neon detailing. The centre has become visibly (and audibly) more enlivened, and now connects to a younger and broader demographic than before. 

Pillar three: flexibility of use. A place needs to be all things to all people and part of your first pillar strategy for stabilising income will rely upon controlled flexibility. Vacant units can be repurposed to provide work near home space, pop-ups for seasonal brands and marketing initiatives or space for local community groups. This flexible use of space should be done on a purely short-term basis, providing the community with an income-driving resource that also enlivens the space and provides much needed authenticity. The business model will be sustainable if change is accounted for and a variety of options are built in, especially those that keep things fresh and exciting. 

Pillar four: well-known brands. Pillar two is occupier diversity, I’ve not forgotten that, but let’s not lose sight of what makes traditional shopping centres desirable. Your visitors will always expect some combination of traditional household names, so don’t downplay the role of everyday brands that make up the backbone of retail spend. These brands have to understand their need to adapt too, in a suitable and up-to-date space, and be supported as they innovate. The prime pitch should be retained for those that encourage footfall, who can justify the rent. It could be Nike, it could be Next, but it should be a footfall driver in its own right.  

What is crucial, however, is this store is valued on the basis of the full benefit the brand sees. In-store turnover, the online halo, digital fulfilment, customer service and brand awareness; all of these datasets can be captured consistently over time and form the basis of CACI’s performance lease model. This is something CACI has created to better reflect the role of the store, and share risk and reward more equitably between owner and occupier. Future places need to look at value differently or they’ll be out-paced by online.

And finally, pillar five: reflect the local community. Supplementing the everyday giants with proven local operators on turnover leases will not only drive footfall, it will give a place a sense of identity and local pride. Some of these may fail, but that’s fine because their role is to give the centre a sense of ownership and freshness where something is always happening. While for those that fly, you have created the start of a partnership founded on mutual support. 

The Elephant Park development by Lendlease exemplifies this, delivering established local operators across F&B, as well as vital community functions like a bike workshop, garden centre and a bank. These things have emotional resonance with local people and, when you add a truly engaging play area and public realm, you deliver value for both new residents and the longstanding community. Granted this is more London community high street than regional town shopping centre, but the principles are transferable.

So how do we get to the future of place? Whereas the 2008 financial crash was a metaphorical earthquake whose aftershocks took years to ripple through into consumers, Covid is a consumer earthquake whose aftershocks will take many years to ripple through into our places. Making our centres fit for purpose will not happen overnight, but with brave asset management, innovative leasing and government support, we can keep them relevant for the future. 

Both local and national governments have a role to play, wielding the stick and proffering a carrot. Nationally, re-purposing the levelling up agenda to focus on rectifying the tax and rates imbalance between physical retail and online retail will be part of the equation. Locally, it means promoting occupancy through a punitive measure that doubles rates for vacant units, while removing rates for any non-profit and community uses. We have to recognise owners need to take more risks with the space they control and trial initiatives, as well as put in place structures that minimise risk and capture value. Our five pillars should give you a nice head-start for putting that into practice.