LONDON (Reuters) - Britain’s largest listed property company Land Securities has agreed a deal with internet search giant Google to drive business to its shopping malls.
The move is the latest initiative by a retail landlord to combat the growth of online shopping. Capital Shopping Centres Group announced this month that it is to invest in free wi-fi networks at its malls and open a fashion website through which shoppers can buy and collect goods from its centres.
The Land Securities tie-up with Google Product Search comes as the number of its retail units in administration - including Jessops, HMV and Blockbuster - rose from 1.8 percent at the end of September to 2.2 percent, the company said in a trading update on Wednesday.
The company will open its Trinity Leeds mall in March - the UK’s only new mall this year. The mall is 90 percent pre-let and Land Securities Chief Executive Rob Noel said he was confident of success despite the weak retail climate.
“Retail is not dead. Retail is changing,” he said. “There are 60 million people in this country that need to eat and wear T-shirts, and they have to get them from somewhere.”
Against the backdrop of a growing number of retail failures, the British online market grew 14 percent in 2012, according to online retail industry body IMRG, which forecasts 12 percent growth to 87 billion pounds ($138 billion) in 2013.
“Some property companies were cynical about online, but more are taking their first steps get in front of the changes,” said J.P. Morgan real estate analyst Harm Meijer.
Retailers increasingly view their stores as showrooms where customers can see and touch items they prefer to buy online, Meijer said. “That means landlords will have to think carefully before linking rents to turnover as they commonly do.”
The deal with Google, which will allow shoppers to see if items are in stock, taps in to the changing habits of mall visitors, said Richard Akers, managing director of retail at Land Securities.
“They will know they can get what they want and plan their day around a meal and a trip to the cinema,” he said.
The company recently upped its stake to 54 percent in the X-Leisure Fund in a bet that Britons will still spend money enjoying themselves during the downturn. X-Leisure has 17 leisure and entertainment venues in the UK, including skateboard parks, climbing walls and snow slopes.
“Go back to the last downturns of the 1970s and early 1990s and leisure spend has always been remarkably resilient,” Noel said. “Yields are also high (at more than 6 percent).”
Elsewhere in the Land Securities portfolio, insurer RSA leased four floors in the so-called Walkie Talkie skyscraper in London’s financial district.
The deal highlights the changing nature of the market in the area, where banking and finance companies have retrenched while insurers seek new office space. ($1 = 0.6302 British pounds)
Editing by Elaine Hardcastle and David Goodman