Insight into Action Ben Dimson October 2016

Insight into Action Ben Dimson October 2016

About British Land One of Europe s largest publicly listed real estate companies Our properties cover 30m sq ft and are home to 1,200 organisations 20bn total assets under management 10bn retail assets under management 60,000 people live and work across our London office & residential portfolio 330m people visit our multi-let retail sites every year We create outstanding places for modern consumer lifestyles: places to shop, eat and be entertained 2

Executive Summary 1 Stores are at the heart of the consumer journey 89% of retail sales touch a physical store 2 Online and offline are symbiotic Channels have become blurred 3 4 5 Convenience is key Consumers shop more locally than ever before Consumer expectations are changing Retail and leisure are increasingly intertwined British Land is being proactive By creating Places People Prefer 3

True Value of Stores From multichannel to omnichannel How to allocate online sales? The True Value of Stores formula Total online sales Online sales of store operators Online that touched the store Beyond the True Vale of Stores there is a halo effect Source: Verdict 4

89% of retail sales touch a store Click & collect sales 5bn Online sales browsed in store 8bn Online sales not browsed in store 18bn Online pure-play sales 13bn Mail order & TV shopping 4bn Physical sales 266bn Boost +5% True Value of Stores 278bn 89% of total retail sales in 2015 Total sales 313bn Total online sales Online sales of store operators Online that touched the store Click & collect and store browsing boost UK physical sales by +5% Source: Verdict 5

Excluding grocery, the boost to physical rises to +9% Click & collect sales 4bn Online sales browsed in store 8bn Online sales not browsed in store 11bn Online pure-play sales 11bn Mail order & TV shopping 4bn Physical sales 136bn Boost +9% True Value of Stores 148bn Total sales 174bn Total online sales Online sales of store operators Online that touched the store Excluding grocery, 66% of online sales are from store operators Of those sales, 53% have touched a store Source: Verdict 6

The boost is determined by 3 levers 1. The ratio online-to-physical 2. Within online, the share of store operators vs pure-plays 3. Within store operators online sales, the share that touch a store Mail & TV Online sales Online pure-plays Did not touch a store Store browsing Physical sales Store operators Touched a store Click & collect Source: Verdict 7

Boost varies considerably by sector +32% +25% +20% +12% +8% +9% average boost excluding Food & Grocery +5% +5% +3% +3% Electricals Sports & Toys Department stores Clothing & Footwear Entertainment Homewares Furniture & Floorcoverings Health & Beauty DIY & Gardening High boost in Electricals: high online penetration, showrooming and click & collect Low boost in Health & Beauty: limited online penetration, impulse and needsbased buying Source: Verdict 8

Role of store differs by sector Examples: Electricals vs. Entertainment Department stores vs. Clothing & Footwear TVoS boost Health & Beauty 92% 2% 2% 2% +3% DIY & Gardening 90% 2% 2% 3% 2% +3% Department stores Furniture & Floorcoverings 77% 87% 8% 8% 4% 3% 8% 5% +20% +5% Homewares 84% 3% 3% 6% 2% +5% Clothing & Footwear 77% 5% 5% 7% 3% 3% +12% Sports & Toys 60% 2% 13% 13% 9% 3% +25% Electricals 49% 6% 10% 17% 16% 2% +32% Entertainment 46% 3% 4% 44% 2% +8% Physical store sales Click & collect sales Online sales browsed in store Online sales not browsed in store Online pure-play sales Mail order & TV sales Source: Verdict 9

Retailer 1 Retailer 2 Retailer 3 Retailer 4 Retailer 5 Retailer 6 Retailer 7 Retailer 8 Retailer 9 Retailer 10 Retailer 11 Retailer 12 Retailer 13 Retailer 14 Retailer 15 Retailer 16 Retailer 17 Retailer 18 Retailer 19 Retailer 20 Differences within sectors Example: 20 leading Clothing & Footwear retailers Boost to physical sales ranges between 0% and 30% Boost to store sales +30% +25% +20% +15% +12% average boost for Clothing & Footwear +10% +5% +0% Source: Verdict, the size of the bubble represents the 2015 True Value of Store sales 10

Shopper profile, ex. grocery Under 35 year olds use stores the most, and their use of online pure-plays is lower Over 35 year olds are heavier users of click & collect Over 65 year olds still use mail order and TV shopping TVoS boost 16 24 81% 2% 5% 6% 6% 1% +8% 25 34 80% 2% 5% 6% 6% 1% +9% 35 44 77% 3% 5% 6% 7% 2% +10% 45 54 77% 3% 4% 6% 8% 2% +9% 55 64 79% 3% 3% 6% 7% 3% +7% 65+ 79% 3% 3% 5% 6% 4% +7% Physical stores sales Click & collect sales Online sales browsed in store Online sales not browsed in store Online pure-play sales Mail order & TV sales Source: Verdict 11

Outlook Click & collect set to double by 2021 True Value of Stores to grow faster than physical sales alone Halo effect also expected to grow as stores continue to influence online sales 20bn 15bn 15bn 11bn 8bn 4bn +16% Growth 11bn 9bn Physical store sales Click & collect sales Online sales browsed in store Online sales not browsed in store 136bn +11% Growth 151bn Other remote sales 2015 2021f Source: Verdict 12

Channels are becoming increasingly integrated with the emergence of a halo effect +55% Postal area share of retailer website visits, indexed vs store opening date 150 140 130 120 110 +55% 100 90 80 70 60 50-20 weeks -15-10 -5 Store Opening 5 10 15 +20 weeks Source: Hitwise, based on a sample of 18 retailers opening at BL schemes 13

True Value of Stores furthers our understanding of affordability British Land retail portfolio affordability 20 % 15 17% 15% 10 10% 9% 5 0 Rent to net sales Excluding the True Value of Stores Total occupancy cost to net sales Including the True Value of Stores Source: Verdict, British Land 14

Consumer expectations are changing We are expanding into new segments to enhance the retail experience Consumer spend (2015) Health & Beauty 4% Home & Leisure 11% Food & Beverage 8% Leisure 6% Housing 25% F&B and Leisure are often interlinked with Retail 77% of F&B spenders in UK centres also spend on Retail Fashion 6% Grocery 12% Other 11% Education 2% Transport & Comms 15% 38% of Leisure users also spend on F&B Historical focus Recent additional focus Not relevant to BL Source: Oxford Economics Source: British Land exit surveys 2015 15

Consumers are shopping more locally than ever before Which of the different aspects of the shopping experience listed below are important to you? Distance 90% 78% 4.2 miles Per shopping trip on average (vs. 5.2 in 1995) 80% 70% 60% 78% 74% 60% 50% 50% Travel Times 40% 39% 35% 18 mins Per shopping trip on average 30% 20% 10% 0% Convenience Retail Offer Source: DfT National Travel Survey 2014 Source: Kantar survey for BL, Nov 2015 Parking Facilities Quality of Shopping Environment Services offered Food, drink & leisure offer 16

Retailers are creating hub and spoke networks To support fulfilment and maintain brand awareness Source: CACI 17

Our portfolio is well positioned to meet both consumer and retailer demands 1 Regional Attracting visitors from a wide catchment for planned trips BL regional centres BL local centres BL asset catchments 2 Local Fitting into the daily life of local communities 18

We deliver through our Placemaking framework, Creating Places People Prefer We Connect We Design We Enhance We Enliven Accessibility Convenience & car parking Form Efficient & relevant built environment Segment mix Balanced retail, F&B, leisure & services Customer service On-site hospitality & customer service Community Supporting & involving local people Authenticity Look & feel, streets & landscaping Occupier mix Selecting brands which fit the location Events Creating a buzz and driving footfall Communication Branding, messaging, marketing & digital Function Facilities, safety & way-finding Occupier service Supporting our occupiers Experience Creating lasting impressions 19

We connect Accessibility Promoting Click & Collect through convenient access & free parking Website Platform Tollgate, Colchester Glasgow Fort Community 13,000 people benefited from this year s community programme Communication 10m website sessions p.a. 20

We design Form c. 300m invested in improving the assets over the last 3 years Glasgow Fort Meadowhall, Sheffield Authenticity 60m Meadowhall refurbishment currently underway & 300m proposed Leisure Hall Function Doddle providing Click & Collect facilities at Ealing Broadway Ealing Broadway 21

We enhance Whiteley, Fareham Whiteley, Fareham Occupier mix Broader range of new occupiers Occupier Service Ability to assess peel-off rates using unit counters Old Market, Hereford Segment mix 8% F&B, up from 2%, with a target to double this 22

We enliven Customer Service 100% property management of multi-let portfolio transferred to Broadgate Estates Fort Kinnaird, Edinburgh Glasgow Fort Experience 4 centres benefited from new play areas this year Mayflower, Basildon Events 150 events across the portfolio in the last year 23

Case study of Placemaking in progress: Broughton, Chester Connect Design Enhance Enliven Footfall up 18%, ERV up 3% 24