It’s easy to mock the mound at the end of Oxford Street. It’s a silly idea. One that’s been concocted by well-intentioned groups who have exhausted numerous other options to pump some life back into the high street, and have to be seen to be doing something.
Unfortunately, white elephants like this could become commonplace across the UK as local authorities, flush with billions of pounds of Future High Streets funding, allocated by the government to ‘level up’ marginal voting battlegrounds, invest heavily in infrastructure and attention grabbing ‘stuff’ that we simply do not need because they have no better ideas of how to revive our town and city centres.
There’s no doubt about it, the high street needs saving. But to understand the way forward we need to understand the problem better: the awkward truth is that it has been failed by the very people who are now being charged with solving a crisis of their own making. Decades of exploitation by the custodians of our local retail spaces has created habits which are incredibly hard to change. Add into this the intersection of many vested interests, and you have the perfect environment for those responsible to hide and blame others. It’s time to unmask them.
First up: Local Authorities (and Central Government) have manufactured a crippling business rates system that no single entity now has the power to reform. Decades of milking retailers has created a reliance on a completely unsustainable source of revenue. Whether in big business or small, we all know this and, promisingly, people are willing to be vocal. Kate Nicholls, the chief executive of UK Hospitality, called for an independent inquiry into the practice, acknowledging “(We) have a system that is fundamentally not fit for purpose in the modern economy” and citing extortionate rates as a fundamental factor in the loss of 10,000 jobs in the sector the previous year. And this is not hospitality specific - from the administration of Debenhams, to the demise of HMV, there’s barely an explanation that doesn’t highlight business rates as part of the reason...and this was before COVID. Let’s hope that, just as it’s abruptly kicked so many parts of our daily life five years into the future, that an overhaul of the business rates racket is next in line.
Second, landlords must answer to sources of capital that have extremely limited appetite for risk and hardly any relationship with their ultimate customer. They are so far removed from the end users – us, the people – that we’re not even a blip on their radar, which makes it difficult for them to care about how we’ve changed, or what we need. And we all know about long distance relationships: they get messy, then they fail. In this context, distance leads to alienation and a high fixed cost environment where even the best retailers struggle to survive.
Third, the large commercial estate agencies have contributed to a vicious circle of self-interest where management, leasing and marketing contracts are shared amongst a tight knit group of companies. This bloated environment, exacerbated by inflated lawyers’ fees, dramatically reduces the commercial competitiveness of the ecosystem. Fresh, nimble blood is kept out and, with that, so is the capacity for challenge that might bring about the change that everyone else can see they need.
Lastly, having become accustomed to the defensive moat that physical spaces provide, the largest retailers have lost sight of their customers. Having been around since the golden years of retail, they’ve been driven to scale by private equity, and have clung on hoping that, if they just wait a little longer, customers will come back. Small margins have become the norm, not something to worry about or look at and think ‘surely, that’s not right?’ Corporate retail is detached and fragile in the face of the challenges being thrown at it by modern priorities.
The value of this entire ecosystem is underwritten by RICS, an inward-looking organisation in extreme turmoil. How can a sector in such need of a refresh move forward, when its economic principles are underpinned by an organisation with a Victorian outlook, and a ‘nothing to see here’ approach when they get called out?
Since the majority of the players in all of these stakeholder groups are inert, trapped in their own self-interest, how can we realistically move forward?
Aside from the financial reckoning that, in spite of continued denial, continues to march towards us and will inevitably drive behaviour change, there don’t seem to be many options. You could be forgiven for concluding that spending our way out of this crisis is the only solution. Indeed, in some cases, cash definitely helps. In most cases, the answer is far simpler: it’s not our infrastructure that is broken, it’s the business case.
So back to those two queues...
The Mound cost £6m, will be in place for less than 6 months and brings with it a whole lot of zeros… zero footfall directly onto Oxford Street, zero association with retail, and zero use of existing assets. It is environmentally and financially unsustainable, leaves no positive legacy, and is so expensive that the project’s leader, Westminster Council’s deputy leader, Melvyn Caplan, resigned with immediate effect.
Sook's queue cost £100k and will be a feature for at least 36 months. It’s brought thousands of people onto Oxford Street, been generated entirely by the power of social media reach, small business and represents the Gen Z appeal of a pioneering spirit. It signals an alignment with the values of the modern world – flexibility, inclusiveness and sustainability, with a fit out that’s completely re-usable and leaves a lasting legacy within existing assets.
For us at Sook, it’s obvious. We’ve proved that if we can make high street space open and accessible it serves the community of which it’s a part, and is used repeatedly, with fervour, by all sorts of occupiers, not just retailers. Given the abundance of empty shops, shouldn’t we be focusing on solutions to activate the valuable assets we already have, rather than chucking away money building shiny things that we hope will attract footfall to dead high streets? Let’s be useful, not superficial. Let’s repurpose empty space and respond to local need, instead of flashing some lights and hoping it’ll make people start spending. Function over form. Driving post-COVID economic recovery is a long road, but all we need is the will to look at things differently. The high street has a bright future its just uncomfortably different from the past that we have all become so accustomed to.
Sook’s Five Steps to Solving the Physical Retail Crisis:
1. Increase Risk Share between landlords and occupiers to find a sustainable way for people to exist in a physical retail space – no-one needs a shop 7 days a week any more.
2. Reassess the Valuation of Retail Assets. The industry has to work together on this – the existing valuation models to recognise the importance of agility and penalise risk. Landlord's are dis-incentivised from taking risk because valuation techniques are set up to reward guaranteed income that no longer exists in the way it used to.
3. Rate System Overhaul. The reality of retail has changed and the system needs to reflect this and share the burden with e-commerce.
4. Break up the Old Boys’ Club. The self-interest and patronage of the agency, management and marketing model is slowing us all down.
5. Standardise Leases. The current economic efficiency around lawyers in real estate is appalling – let’s make standardised leases the norm.