Woolworths’ property portfolio: Well worth it?

The story of what has happened to Woolworths’ property portfolio in the past year mirrors the varied success different locations achieved within the chain had when the business was still trading.

Unsurprisingly, while the best sites were quickly cherry-picked, the long tail stores remain. Last week, CB Richard Ellis - the property agent that acted for administrator Deloitte - revealed that 75% have been re-signed. Three months earlier 60% were let or under offer.

Deloitte was left with a varied portfolio of prime locations in city centres and secondary sites in market towns and suburban shopping parades. Since the last Woolies stores closed in January, a noticeable difference has emerged between those that were quickly re-let and are trading well for other retailers, and those that are still vacant and beginning to pull down the areas around them.

CBRE head of retail Ciaran Bird says retailers were quick to react to acquire the prime sites in high streets and town centres across the UK.
While fast-growing frozen foods specialist Iceland has taken the largest number of units, as a category the general merchandise discounters - B&M Bargains, Poundland and 99p Stores - have taken more stores than any other group of retailers, between them snapping up 39% of former Woolworths units that have been let. That’s unsurprising as these businesses see themselves as heirs to Woolies’ traditional role as the home of value general retailing on secondary high streets.

For 99p Stores - which has acquired 52 sites and opened 46 stores - Woolworths’ closure was an opportunity to accelerate its expansion plans and acquire a portfolio of prime locations that it could have only dreamed of a year before. It has taken full 10- to 15-year leases on the former Woolworths stores, and commercial director Hussein Lalani describes Woolworths’ demise as “the perfect storm for retailers like us who want to expand”.

Goodwill hunting

Lalani explains the appeal of trading from units deserted by the chain. “When Woolworths opened in a town, that town’s retail grew around it,” he says. “In many cases it would be the first national retailer to come to that area. The sites left behind by Woolworths have a lot of goodwill behind them.

“Not many retailers are expanding at the rate we are and, to be honest, the sites we have taken on are much bigger than we’re used to. The average size of our stores was 4,000 sq ft before but now it is closer to 13,000 sq ft.”

Woolworths’ demise has been 99p Stores’ gain in many ways, but primarily in terms of its dominant locations on many shopping streets. As Lalani points out, the discount retailer is now “mopping up” Woolworths’ remains.

At the time the stores became empty, Lalani says competition was not particularly intense. But unlike many retailers that waited until the stores reverted to the landlords in the hope of better deals, he admits he did not waste time in contacting Deloitte. “We got in there quick,” he says. “We literally found out what was happening on Christmas Eve and spent Christmas Day looking at the different sites and taking pictures.”

The appeal of former Woolworths units does not lie only in their location. Woolworths was the largest shop on many high streets and one agent who works with a retailer now trading from several of its former stores says it was the large ground-floor space that made the deals happen, adding: “You wouldn’t believe how hard it is to get people to walk upstairs.”

Despite the recession, CBRE says that on the majority of stores that were re-let the rents achieved were higher than those paid by Woolworths. However, some landlords have taken pain, with 35% of the re-lettings where a rent is available being at a lower level.

Also, with a lacklustre development market, the large spaces vacated by Woolies provided an unexpected gap that many retailers - not just discounters - were willing to plug, adds Bird.

Peacocks has taken 12 units and is still acquiring, and director of retail operations Chris Miles describes former Woolworths stores as “heartland territory” for the clothing chain.

Boots took units in Bangor, Beverley, Harrogate and Chichester - where it previously had a presence - as well as Clapham where it didn’t. Boots store development director Mark Chivers says the Clapham site has given it a high street presence in an area where it was unrepresented.

He highlights that, aside from the property, the collapse of Woolworths has given Boots access to new recruits with a similar outlook to its own workforce.

Son of Woolworths

A late entrant to the race for former Woolworths stores is Alworths. The retailer - described as the “son of Woolworths” due to its product ranges and the fact that it was set up by former Woolies director Andy Latham - launched its first store in Didcot, Oxfordshire, this month in one of the defunct chain’s units. It will open four more stores in Woolworths units before Christmas.

Latham, who is Alworths managing director, was Woolworths’ head of stores and concessions. He is unfazed by the danger that the better stores will already have been cherry-picked, and insists taking on ex-Woolworths stores is not an attempt to resurrect it under a new name.

“Primarily the location is the key thing in terms of demand,” he says. “From our perspective, ex-Woolworths sites have provided a great opportunity for us. People in market towns still have a desire for high street shopping.

“We’re targeting local high streets and want to appeal to parents picking their kids up from school who then need to do some shopping. We have changed the sites in that they are less cluttered with a better layout.”

Although Alworths bears a resemblance to Woolworths - not least in its name - Latham says the stores are being changed to provide a better shopping experience. “We wanted to give people better access to the stores, with wide aisles,” he says. “We are a kids-oriented retailer and want people to feel comfortable in our stores.”

The knock-on effect of Woolworths’ closure varies. In smaller towns, where the retailer was the dominant store, there are large gaps that remain to be filled. In cities and large towns, they have been filled by discount, fashion and grocery retailers that are thriving from prime spots on the high street.

On the high streets where the Woolies store has not yet been taken, other vacant units may become harder to fill.
Experian director of retail consultancy Jonathan de Mello says: “In smaller towns there has been 25% to 35% less spend. There is less of a reason to shop there. Before, customers might have gone for the kidswear or sweets but suddenly they have to go somewhere else because these smaller locations don’t offer that anymore.

“These locations will become marginalised by out-of-town shopping centres. This has a spiralling effect on a town and will affect surrounding retailers.”

The defunct variety retailer’s space in Northern Ireland has been the most popular - 89% of the sites there are let or under offer. 70% of the sites in the Southeast, including London, have been snapped up; the Southwest has fared worst, with only 48% taken.

In the long run, empty shops may be turned into offices or residential space, adds De Mello. Like many, he believes “some high streets will never recover from the closure of Woolworths”.

Bird is confident by this time next year most, if not all, of former Woolies stores will be let. Although 25% of the units - which by virtue of the fact that they’ve not been re-let are likely to be the weaker stores - remain empty, Bird says there is still interest in the properties and, as confidence in the market grows, deals are becoming more competitive.

The closure of Woolworths has - in a matter of months - changed the face of British retailing. It was a high street staple for 100 years but other retailers have swiftly replaced its signage and taken its business.

But for those areas still scarred by an empty Woolies, the future looks bleak.