'Chicken Wars' and royal appointments: how expanding agent KLM is staying at the heart of retail and leisure

KLM Real Estate, the specialist retail and leisure agency, is celebrating 35 years in business and has just moved to a new office on Wells Street, close to London’s Regent Street, one of its key stomping grounds. CoStar News caught up with the team to see how the business keeps on top of the ever-changing world of real estate,

Having started as a retail specialist in high streets and centres in 1990, the firm now covers outlets, out of town, mixed-use urban regeneration, repurposing of retail space, leisure, food and beverage, workspace, and other specialist alternative use categories, providing a broad view of the retail market.

Originally Kitchen, La Frenais and Morgan after founders Ian, Max and Nick, its evolution was a sure-but-steady growth initially, as it challenged the major long-standing advisers to win work.

James Andrews, partner and a specialist in London estate strategies, who joined in 1994, said: “The business started with founders with a good reputation. It has been a bit David-and-Goliath with us wrestling the corporate giants, but we have become a leader in our market by maintaining our independence and essentially doing what we do really well. Our advice is as good, if not better, than others because it has to be. It is always partner-led and we deliver what we say.

"We regularly deliver some of the UK’s best property deals but keeping a relatively low profile. Growth has always been deliberately conservative but now we have a team of well over 20."

The business has, over the years, spread into new sectors, areas and geographies, using its fundamental expertise in retail as the platform.

Partner Dominic Brady specialises in outlet leasing, retailer services and shopping centre leasing in the UK and Europe. He advised on the initial development and growth of the Landsec outlet portfolio and more recently on the redevelopment of The Boulevard Outlet in County Down, Northern Ireland, along with projects in Malmo, Sweden, and Honfleur, France, and O2 Outlet in London.

He sees KLM as being unique in the outlet centre advisory world. "Our heritage as retail experts means we can take a much more holistic views than others. We see brands across all retail and leisure formats and from that we know which brands would benefit from being in an outlet environment. Equally, we can bring the best of outlet to full-price environments."

In terms of the expansion of the business, Andrews says most of the growth has been organic with staff selectively recruited by specialism and moving up the ranks.

Notably, in 2017 Will Andrews, Jonny Perkins and Mark Smith joined from JLL to set up an out-of-town retail and leisure team. Rob Dales had already joined as an investment partner from JLL in 2015.

Andrews says: "People stay and work their way up at KLM – we have a brilliant working environment and culture. Excitingly, we also have an apprentice now."

KLM was the first firm of its type to co-found an international network, which now has like-minded independent businesses with offices throughout Europe and the US which it says means that investors and occupiers seeking a "fresh viewpoint" have been able to access advice across global projects.

Mostafa Sbitri, a partner focusing on the central London and international markets, is a key figure in the UK market for retailers looking to expand here and then across the globe – or the other way around. Well-known brands he advises include Sezane, Charlotte Tilbury, Dries Van Noten, Soeur, Jacquemus, Oh My Cream, and Jimmy Fairly. Recent successes include leasing a major new waterfront development in Monaco with Meyer Bergman, bringing Aimé Leon Dore to Soho and acquiring a Bond Street flagship for Jacquemus.

"London gives you a helicopter view of one of the best markets in the world and that knowledge is sought after – enabling us to bring ideas to international locations that local advisers don’t have – and we have worked in Norway, Sweden, Denmark, Austria, Poland, Monaco and Ibiza; guiding on strategy and bringing fresh ideas."

The KLM team is adamant that the London and wider prime UK retail pitches have rarely been as busy in the 35 years the business has been running.

Sbitri says: "Every brand wants to be in London. That's because of the decline of independents, the fall of department stores, and less buying online. Shops in Marylebone High Street are receiving 17 to 18 offers when they come up for lease now. In King's Road every store available sees four offers, Westbourne Grove sees three."

In a significant win, KLM was recently picked by the Crown Estate as one of its retained advisers after it re-pitched its London Estate Street advisory role.

James Andrews says it is one of the most exciting mandates in real estate advisory: "To look down Regent Street from Oxford Circus and realise we have built our business to be able to do this – one of the best jobs of its kind in the world – is hugely satisfying and a great responsibility."

Oli Marcroft, who heads the leisure and food and beverage team, has carved out a key role for himself advising landlords on development and asset management strategies, as well as a select number of tenants on their expansion.

Key landlord instructions include L&G at its leisure parks, Aviva and South Kensington Estates. Major tenant instructions are The Light, Dave's Hot Chicken, Flat Iron and All Star Lanes and recent highlights have included delivering Café Kitsune in Covent Garden, launching Dave’s Hot Chicken's first UK store on Shaftesbury Avenue, Flat Iron in Southbank, and bringing All Star Lanes back to the market to find more sites.

At present he is heavily involved in what is being described as the "chicken wars" as a handful of new, social media-savvy hot chicken purveyors look to grow market share across the UK. Marcroft is advising Dave's, the restaurateur backed by Drake, Usher and Samuel L Jackson, and says the competition for space in this area is fierce.

Marcroft and Sbitri say the market in prime retail locations is getting so intense that retailers are having to outbid food and beverage operators to secure sites that traditionally would have been only for retailers.

"Recently a site in Charing Cross moved to £700 per square foot from a quoting rent of £400 per square foot in order for the retailer to knock out the leisure bidders," says Marcroft. "Another in London went from £500 to £700 per square foot with no rent free incentive. And it is the [quick service restaurant] brands up against retailers."

The team are clear that it is high time the sentiment on retail and leisure property, at least at the prime end, is reappraised.

Brady says that those at the cutting edge know how strong a market it is. "A lot of retail is to do with an understanding of fashion and getting ahead to move the brand to where they should be. We have that network across countries, a team of like-minded companies in each country, depth of data and senior contacts. Lots of landlords need that approach."

Sbitri points to a string of recent transactions moving international brands into the UK and elsewhere. These include bringing fashion brand Cafe Kitsune's new French-Japanese fushion coffee brand to 55 Monmouth Street, as well as French brand Sezane to a fashion store in Marylebone and Provencal designer Jacquemus to 33 Bond Street.

This work is global. KLM has advised Peruvian-inspired restaurant Pachamama on a first move outside London, to Abu Dhabi and is advising Sezane on moves in Vienna and Amsterdam. It is working with Snipes, the German footwear store backed by DJ Khaled, on its move in Paris and then to find 15 stores in France, and now in Miami. And it is bringing Germany's Dita eyewear brand to Brompton Road in London.

It is not just in London through where there is strong demand for space. Will Thomas, a partner leading the provincial team, is focused primarily on shopping centre leasing, mixed-use urban regeneration projects and portfolio strategy. He says that the best new retail environments across the country are also seeing competitive demand. "We are seeing strong bidding in Oxford, in Lincoln, Worcester and Marlow. But it is happening across the country where the key ingredients for success are in place."

Mark Bennett, a partner focusing predominantly on the investment and development market and in particular mixed use, high street and leisure assets, says there are also strong signs of life for UK retail investment.

"More major investors are making shopping centres core investment choices – such as RLAM, PGIM and Landsec – but it is for the best located retail."

Out of town specialist Will Andrews says retail parks are particularly in demand, in part because the ownership structure is less fractured and the underlying performance of tenants is stronger. "Retail park assets are consolidating and performing better, seeing rental growth."

So what next for KLM?

One new area Bennett says the business will focus on more is asset management. "You have seen advisers start moving into this space and we have started to do that over recent years too. We will make a move into it in a bigger way as we have the experience and expertise in house; so why not?"

James Andrews says the business is in a good place to continue evolving because of its mix of experience and youth working very closely together. "We have a very youthful, diverse team which means we really can provide solid property advice which is absolutely in touch with all the latest trends in every area for businesses."