Insight into Action

Ben Dimson October 2016

2

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

• 60,000 people live and work across our London office & residential portfolio

• 330m people visit our multi-let retail sites every year

£20bn total assets

under management

£10bn retail assets

under management

“We create outstanding places for modern consumer lifestyles: places to shop, eat and be entertained”

3

Channels have become blurred Online and offline are symbiotic

2

3 Convenience is key Consumers shop more locally than ever before

1 Stores are at the heart of the consumer journey 89% of retail sales touch a physical store

4 Consumer expectations are changing Retail and leisure are increasingly intertwined

Executive Summary

5 British Land is being proactive By creating Places People Prefer

4

True Value of Stores

• From multichannel to omnichannel

• How to allocate online sales?

• The True Value of Stores formula

• Beyond the True Vale of Stores there is a ‘halo effect’

Online sales of store operators

Total online sales

Online that touched the store

Source: Verdict

5

• Click & collect and store browsing boost UK physical sales by +5%

Physical sales

£266bn

True Value of Stores £278bn

Total sales

£313bn

£5bn £8bn £18bn

£13bn £4bn

89% of retail sales touch a store

89% of total retail sales in 2015

Click &

collect

sales

Online sales

browsed

in store

Online sales

not browsed

in store

Online

pure-play

sales

Mail order &

TV shopping

Source: Verdict

Online sales of store operators

Total online sales

Online that touched the store

Boost +5%

6

Physical sales

£136bn

True Value of Stores £148bn

Total sales

£174bn

£4bn £8bn £11bn

£11bn

£4bn

Excluding grocery, the boost to physical rises to +9%

Click &

collect

sales

Online sales

browsed

in store

Online sales

not browsed

in store

Online

pure-play

sales

Mail order &

TV shopping

Online sales of store operators

Total online sales

Online that touched the store

Source: Verdict

• Excluding grocery, 66% of online sales are from store operators

• Of those sales, 53% have touched a store

Boost +9%

7

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

The boost is determined by 3 levers

Physical sales

Online sales

Mail & TV

Store operators

Online pure-plays

Touched a store

Did not touch a store

Click & collect

Store browsing

Source: Verdict

8

Boost varies considerably by sector

• High boost in Electricals: high online penetration, showrooming and click & collect

• Low boost in Health & Beauty: limited online penetration, impulse and needs-

based buying

+9% average boost excluding Food & Grocery

+32%

+25%

+20%

+12%

+8%

+5% +5% +3% +3%

Electricals Sports & Toys Departmentstores

Clothing &Footwear

Entertainment Homewares Furniture &Floorcoverings

Health &Beauty

DIY &Gardening

Source: Verdict

9

Role of store differs by sector

46%

49%

60%

77%

84%

87%

77%

90%

92%

6%

2%

5%

8%

3%

10%

13%

5%

3%

4%

8%

2%

2%

4%

17%

13%

7%

3%

3%

8%

2%

2%

44%

16%

9%

3%

6%

5%

3%

2%

2%

2%

3%

3%

2%

2%

Entertainment

Electricals

Sports & Toys

Clothing &Footwear

Homewares

Furniture &Floorcoverings

Departmentstores

DIY & Gardening

Health & Beauty

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

• Examples:

– Electricals vs. Entertainment

– Department stores vs. Clothing & Footwear

Source: Verdict

+3%

+3%

+20%

+5%

+5%

+12%

+25%

+32%

+8%

TVoS boost

10

Differences within sectors

• Example: 20 leading Clothing & Footwear retailers

• Boost to physical sales ranges between 0% and 30%

Re

taile

r 8

Re

taile

r 2

0

+10%

Re

taile

r 1

9

+20%

Re

taile

r 11

Re

taile

r 1

6

+25%

Re

taile

r 1

3

Re

taile

r 1

2

+5%

+0%

Re

taile

r 1

7

Re

taile

r 1

5

Re

taile

r 1

8

+15%

Re

taile

r 1

4

+30%

Re

taile

r 9

Re

taile

r 6

Re

taile

r 5

Re

taile

r 4

Re

taile

r 1

0

Re

taile

r 1

Re

taile

r 2

Re

taile

r 3

Re

taile

r 7

Boost to store sales

Source: Verdict, the size of the bubble represents the 2015 True Value of Store sales

+12% average boost for Clothing & Footwear

11

• 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

Shopper profile, ex. grocery

79%

79%

77%

77%

80%

81%

3%

3%

3%

3%

2%

2%

3%

3%

4%

5%

5%

5%

5%

6%

6%

6%

6%

6%

6%

7%

8%

7%

6%

6%

4%

3%

2%

2%

1%

1%

65+

55–64

45–54

35–44

25–34

16–24

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

+8%

+9%

+10%

+9%

+7%

+7%

TVoS boost

Source: Verdict

12

£136bn £151bn

£4bn

£9bn

£8bn

£11bn

£11bn

£15bn

£15bn

£20bn

2015 2021f

Physical store sales

Click & collect sales

Online sales browsed in store

Online sales not browsed in store

Other remote sales

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

Source: Verdict

+16% Growth

+11% Growth

13

Channels are becoming increasingly integrated with the emergence of a ‘halo effect’

+55%

50

60

70

80

90

100

110

120

130

140

150

+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

+55%

Postal area share of retailer website visits, indexed vs store opening date

14

True Value of Stores furthers our understanding of affordability

• British Land retail portfolio affordability

0

5

10

15

20%

10%

Rent to net sales Total occupancy cost to net sales

Excluding the True Value of Stores Including the True Value of Stores

Source: Verdict, British Land

9%

17% 15%

15

Consumer expectations are changing

Source: Oxford Economics

Housing 25%

Education 2%

Other 11%

Grocery 12%

Fashion 6%

Home & Leisure

11%

Health & Beauty

4%

Food & Beverage

8%

Leisure 6%

Historical focus Recent additional focus

Not relevant to BL

Consumer spend (2015)

Transport &

Comms

15%

77% of F&B spenders in UK

centres also spend on Retail

38% of Leisure users also spend

on F&B

F&B and Leisure are often interlinked with Retail

We are expanding into new segments to enhance the retail experience

Source: British Land exit surveys 2015

16

Consumers are shopping more locally than ever before

78%

Distance

4.2 miles Per shopping trip

on average

(vs. 5.2 in 1995)

Travel Times

18 mins Per shopping trip

on average

“Which of the different aspects of the shopping experience listed below are important to you?”

78%

74%

60%

50%

39%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Convenience Retail Offer ParkingFacilities

Quality ofShopping

Environment

Servicesoffered

Food, drink& leisure

offer

Source: DfT National Travel Survey 2014 Source: Kantar survey for BL, Nov 2015

17

Retailers are creating hub and spoke networks

To support fulfilment and maintain brand awareness

Source: CACI

18

Our portfolio is well positioned to meet both consumer and retailer demands

Regional

Attracting visitors from a wide catchment for planned trips

Local

Fitting into the daily life of local communities

1

2

BL regional

centres

BL local

centres

BL asset

catchments

19

Accessibility

Convenience &

car parking

Community

Supporting &

involving local people

Communication

Branding, messaging,

marketing & digital

We

Connect We

Design

Form

Efficient & relevant

built environment

Authenticity

Look & feel, streets

& landscaping

Function

Facilities, safety &

way-finding

We

Enhance

Segment mix

Balanced retail, F&B,

leisure & services

Occupier mix

Selecting brands

which fit the location

Occupier service

Supporting our

occupiers

We

Enliven

Customer service

On-site hospitality

& customer service

Events

Creating a buzz and

driving footfall

Experience

Creating lasting

impressions

We deliver through our Placemaking framework, Creating Places People Prefer

20

Community

13,000 people benefited from

this year’s community programme

Tollgate,

Colchester

Accessibility Promoting Click & Collect through

convenient access & free parking

Communication

10m website sessions p.a.

Glasgow Fort

We connect Website

Platform

21

Function Doddle providing Click & Collect

facilities at Ealing Broadway

Glasgow Fort

Ealing Broadway

Authenticity

£60m Meadowhall refurbishment currently underway &

£300m proposed Leisure Hall

Form

c.£300m invested in improving

the assets over the last 3 years

Meadowhall, Sheffield

We design

22

We enhance

Occupier mix Broader range of new occupiers

Segment mix

8% F&B, up from 2%,

with a target to double this

Occupier Service Ability to assess peel-off

rates using unit counters

Old Market, Hereford

Whiteley, Fareham Whiteley, Fareham

23

Customer Service

100% property management of multi-let

portfolio transferred to Broadgate Estates

Events

150 events across the

portfolio in the last year

Experience

4 centres benefited from

new play areas this year

Glasgow Fort

Fort Kinnaird, Edinburgh

Mayflower, Basildon

We enliven

24

Case study of Placemaking in progress: Broughton, Chester

Enhance

Connect Design

Enliven

Footfall up 18%, ERV up 3%