A Nation of Shopkeepers
David Rabinowitz and Matt Epstein who, with Nancy Davids, co-chair Goulston’s Retail, Restaurant and Consumer Group, spent some time in London last month surveying the retail landscape. There are both similarities and differences between the US and UK markets. Of course, the impact of ecommerce on bricks and mortar is top of mind. It doesn’t seem that many UK retailers who started out peddling their wares on the web have jumped to the High Street, a la Warby Parker, Bonobos and Amazon. You will, however, find that entertainment and food takes up more and more square footage on both sides of the Atlantic. It’s not simply aimed at appealing to the Millenials’ appetite for the next “experience”; restaurants seemed packed with baby boomers as well. The Brits are taking the Brexit uncertainties in stride; the professionals we met with are charging forward with their deals with the belief that you can’t control that which you cannot predict. We heard differences of opinion regarding the future of The City (i.e. London’s Wall Street). Some expressed concern about the rumblings from banks, hedge funds and private equity shops that Paris, Dublin and Frankfurt were looking more and more attractive. Others discounted the likelihood of a mass exodus of money to cities which lacked the infrastructure, labor laws and financial depth of London.
Perhaps the greatest difference we noticed between London and Manhattan can be attributed to the ownership of large tracts of London by tradition bound and centuries old estates, such as the Crown Estate and the Grosvenor Estate. You simply don’t see the same level of retail vacancies on Regent and Bond Streets as you find on Madison Avenue and in Soho. These large estates take the long view; landlords look for stability and don’t squeeze the last dollar in rent from each tenant. This results in some very hefty key money payments from tenants assuming leases. But with the Crown’s wealth, it’s not necessary to continually refinance to take your cash out. It’s a steadier retail landscape with more gentle hills and shallower valleys. Although we’re not making any value judgments, shoppers in London—and the footfall on Regent Street is something to behold—rarely encounter the depressing vista of an empty store that resulted from the oversized rental expectations of a landlord with a hungry lender awaiting its monthly feeding.