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Shopping Around

15 June 2007

It is time for a step change in provision for facilities and support services to Britain’s retailers. Jane Fenwick reviews trends that are crossing the Atlantic promising a more integrated approach to facilities management for shopping centres and high street businesses

Bullring, Birmingham

NAPOLEAN ONCE SNEARED that Britain was ‘a nation of shop keepers’. Shops and shopping has changed somewhat since then, and although local high streets and individual shops still survive, shopping centres have come to dominate the British retail landscape since the 1980’s both out of town, such as Bluewater in Kent, and in city centres, such as the Bullring in Birmingham. They have transformed the way we shop and set the standard for the comfortable environment that we expect from our shopping experience.

However, shopping centres are also more than for just shopping. They can be a vital component of inner city regeneration as at the Bullring, Birmingham, and the engine of the local economy. According to the British Retail Consortium, 11 per cent of all enterprises in the UK are retailers operating in over 278,000 outlets (2006). Retail sales in the UK were £256bn – that more than the combined economies of Denmark and Portugal.

However, retailing is an increasingly competitive market. Not only is sales growth slowing, there is a deflationary retail environment with an intense focus on price. Growing competition is coming from the internet which offers a different and often cheaper shopping experience. By 2015, online sales will account for 11 per cent of total retail spend and in some sectors, such as music and video, almost half the spend will be via the internet. It is hardly surprising, therefore, that the management of shopping environments is set to change to maximize efficiencies, to keep costs down and standards up, and to enhance asset
value for owners and landlords.

Up to now, retailers have contributed via their services charges to managing agents to maintain common parts and provide utilities, with each retail unit managing its own cleaning, security and maintenance contracts.Increasingly, the larger retailers have rationalized services to award FM contracts on a regional or national scale while others have continued with local provision.

But change is coming from across the Atlantic says the British Council for Shopping Centres. In the US ‘total facilities support’ is becoming established as a key method of enhancing service delivery, controlling service charges and creating new revenue streams.

Some 18 months ago US shopping centre owners, Simon, teamed up with Grosvenor Estates, Henderson Global Investors and Donaldsons LLP to form a JV called RElab. Tested in the Buchanan Galleries, Glasgow, RElab is now used by more than 50 centres in the UK where maintenance, security and cleaning is provided not only for common areas but also for tenant spaces. Delivering facility services to the retailers requires particular skills and systems that meet the needs of a public access facility, maintain critical services that affect public safety and business success, all within a constant downward pressure on costs in a volatile retail environment. Footfall through a shopping centre is a key metric for service providers as the more shoppers there are, the more facilities need to be cleaned and the more waste is generated. Footfall at the Bullring was predicted on opening to be 25million but now it is 37million, and service providers have to adjust to this variation through the day and the seasons.

With potentially dozens of retail units in any shopping centre each with their own reactive and PPM maintenance contractors, cleaners, waste management contracts, the facilities picture is confused and inefficient. A host of contractors descend on shopping centres from miles around after the public leaves for the day to serve individual retailers.

All this is about to change as this trans-Atlantic approach is soon to be extended by Europa Facility Services through a 50:50 JV with Control Group. Europa, which currently has facility services contracts with over 20 shopping centres including the Bullring, Birminham and Metro Centre, Gateshead, is teaming up with Control Group, a privately owned US based services company that celebrated its centenary last year.It currently provides support services to 130 shopping centres in the US.

This move followed a visit last year by Europa’s MD, Martin Jones and Sales Director, Richard Chadwick to the US to explore the potential for importing this new service delivery model to the UK. Their 50:50 joint venture, called Origin, is the result. Origin is designed to offer integrated services and a single operational management to shopping centres, managing agents and property owners. This will, they claim, free up centre managers to become business managers focusing on maximising revenue from tenants and the profitability of the centre including a new potential revenue stream for service provision. The Origin model will offer a full range of support services to retail tenants and to other business in the locality typically retailers and other businesses in the high street. Good facilities management and innovation can really make a difference to the asset owner as shown by landlords in the US who have ‘snapped up’ the ‘one team’ concept whereby the shopping centre resources on site are available to the retailers.

Chadwick says the time is right for British retailers and shopping centre managers to consider new ways of maintaining retail environments. “There are business pressures on the retailers and managing agents to not only reduce service charge costs but also face an environmental agenda, and there is pressure from retailers – the bigger ones have high profile corporate social responsibility policies and are FTSE 100 companies, with shareholders to satisfy.”

He continued, “Under this pressure, working in partnership is essential as no one party can do this on their own. One of the major differences from about 10 years ago has been that in the shopping centre environment, people now have to work together – the owners, the agents, the management team and the service providers must all be around one table.” The conditions for a total facilities support approach are there says Europa’s MD, Martin Jones. “It is a fantastic opportunity. Origin will be our model in the UK, jointly owned with Control. If Origin needs a supplier, Europa could be considered, but the market is open to any supplier. By bringing in the Origin management structure to a shopping centre you can reduce other management layers each with their own margins and profit.”

The ability to develop additional revenue streams within the shopping centre has huge potential for maximising services already provided for the agent such as maintenance, waste management and cleaning for the retailers. In fact, as Chadwick explained, retailing in the UK is “Already heading down this route. We at Europa are making sure that there is someone out there able to provide this service offering correctly rather than just looking at it as a revenue generating offering on the servicecharge – which it is not.”

He explained that Origin is a model designed to find efficiencies, share in the benefits and reinvest in the shopping centre. Partnership is an integral part of a model that brings efficiencies to the bottom line. Additionally, Origin is licensed to use Facility Source, a software call centre built on Maximo which can manage reactive and PPM activity for any retailer across the country using Origin’s resources. Ideal for emerging and medium sized retailers without national maintenance agreements, Facility Source can provide skilled resources and management from Origin, and real time reporting.

Europa Facility Services has seen phenomenal growth in the last year. It nearly doubled its turnover in 2006 from £12.7m to £21.6m and took on 500 more staff. It provides support services to more than 20 shopping centres, with retailing representing about 60 per cent of its business. “It tested our systems and processes,” Jones confessed, “and now we are developing our communications with staff to ensure they understand our culture and values encapsulated in a ‘diamond’ as a symbol of quality.” Jones wants to make Europa both a supplier and employer of choice, and diversify its client base more.

One of Europa's flagship sites is Bullring which has won many awards for design, management, standards and innovation since it opened, and Europa has played a significant part in this success story over the past three years. Under its renewed £1.4M per year contract, Europa maintains an on-site management team and is responsible for the supply of equipment and consumables, mall and back-of-house cleaning, high level cleaning, total waste management / recycling initiatives, pest control services and hygiene requirements. It is also responsible for maintaining the environment in the pedestrianised area around the Bullring and for external cleaning including the hard-to-access discs on the distinctive exterior of the Selfridges building.

Large centres such as the Bullring, through to smaller centres and high street retailers and business could all benefit from this change of approach for delivering retail environments already embraced in the US, set to come to the UK soon, and in time across Europe.


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