“We want a portfolio of spaces that people can use and learn from and it’s analytically driven, so you’ll learn what’s worked in which location and you won’t stop having to make decisions on a kind of gut feel basis. We’re trying to provide effectively online experience in real life and then there’s a whole host of value add elements that we can give to bigger brands and smaller brands around instalment, staffing. Even an agency piece around, you know, making that experience really exciting.”
Susan Freeman
Hi, I’m Susan Freeman. Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today, I am delighted to welcome John Hoyle. John is an entrepreneur and real estate professional focused on developing social ventures for profit in the UK and beyond. After a career as a Platoon Commander with the British Army, serving in Germany, Iraq and London, John became a Development Manager in Abu Dhabi and, on his return to the UK, worked with the London Organising Committee of the Olympic Games and Grosvenor Estates. John founded Sook in 2019 to address the acute problems facing the UK high street. In particular, John was interested in addressing the imbalance in the relationship between landlords and occupiers so that both sides could thrive in a much fairer and mutually beneficial way. Since then John has opened Sook spaces on London’s Oxford Street and South Molton Street, in Hammersmith, Southampton, Cambridge, Birmingham, Leeds, Gateshead and Edinburgh with significant UK and international expansion planned for 2023 and beyond. So now we are going to hear from John Hoyle and what was behind his move from property developer to social impact entrepreneur and what he’s learnt along the way. Good morning, John.
John Hoyle
Good morning, thanks for having me.
Susan Freeman
It is good to see you. I can see that you have a black eye and I’m going to ask you about that. In fact, you can tell me now. How come you are sitting with a black eye?
John Hoyle
Well, I, unfortunately, my son clocked me in a swimming pool this weekend. It’s been gorgeous weather but I have, yeah, had an injury inflicted me on by a three year old.
Susan Freeman
So, it’s good to see you again and I think we first met at a property industry dinner and I know it was pre-Covid, I think it was probably in 2019 so, either Sook was just an idea then or you were just about to get started because I remember you telling me about it and it sounded such an exciting concept. Shall we sort of go straight in and you know talk about what Sook is and how it came about.
John Hoyle
Yeah, absolutely. So, well I opened my first shop in the summer of 2019, so I’m guessing we met just after L&G had said “we’re going to give you a property shop” because our original, minimum viable products in Cambridge with 17 screens that I’d banged on a wall, rented at anyone for 10 quid an hour, so we’ve moved on a bit since then. I mean that shop, I spent the first week having to sort of deal with rat infestation and damp and all sorts of problems, so yeah, we are, we’ve grown up a lot since then and so what Sook is, is I suppose an expression of my frustration with the inflexibilities of a sector that I know really well, which is retail real estate, so I worked for Grosvenor and did quite a lot of retail there and it always just frustrated me that there were quite a lot of empty spaces on the estate and that’s not just exclusive to Grosvenor’s, you know, there’s 15% vacancy across shopping centres in the UK right now and that always seemed to me like a self-inflicted wound. I know everyone blames all sorts of things from business rates to the online threat but in many instances, because asset managers just don’t know how to engage on a basis that is different from what the RICS has told them is the thing to do when they become surveyors and we’d, you know, 15,000 empty shops as it was in 2019 and getting on you know, would be 100,000 soon, it sort of really frustrated me that we’re not making use of these assets that sit at the heart of our communities throughout the UK and this is a problem that’s replicated in developed markets around the world so, we’ve all seen the success of giant businesses in the office sector and the residential and hospitality sectors, all focused on utility and a fractional leasing model and it seemed obvious to me that you could do the same in retail and, you know, Susan we talked about Appear Here before and you’ve interviewed Ross, you know that they’re, they’re pioneers in that but as a customer of Appear Here, I also felt there were lots of things that they weren’t doing that you could do to facilitate retail use and also to embrace non-retailers in physical spaces and that’s really where Sook came from, a frustration to do you know a better job of making use of all these physical spaces, partly for profit because to me it’s obvious that it can make more money and partly because I think there’s a community responsibility for all landlords to embrace all sorts of different users at different times rather than just slightly lazily locking up an occupier into a ten year type arrangement and waving goodbye to them after you’ve signed that deal to maybe put the rent up five years later.
Susan Freeman
It must have taken quite a lot of courage to leave Grosvenor and to go into something which was entirely new and I mean you’ve mentioned Appear Here but I think what you were planning to do was entirely different, I don’t think, had anybody else had a go at this or was it a completely new concept?
John Hoyle
Yeah, it is completely new, the element of the, you know the digital and the physical that we bring, a device that effectively makes your occupation easier. That had never been done before and I mean you just used the word ‘courageous’, I mean you could also have said mad, I mean I think any founders have to have an element of madness and you’re right on that, you know your success or failure is what determines whether you’re mad or brave or you know brilliant or stupid and I get very frustrated in environments where I can’t move the needle and I think that’s probably a common thing shared with you know frustrated entrepreneurs, not in my experience less than 10% of people actually want to embrace change and lead it and I always have but also I was at a stage in my life where if I wasn’t going to try and do something myself, that moment was going to pass, I’m, I was 40 when I founded Sook, I didn’t have a child at that stage and on a sort of personal note, I also had at the time a very sick but incredibly inspirational and determined wife and that, she’d had two lung transplants and that completely changes your perspective on risk and in many ways, releases you to have a go at crazy things because ultimately isn’t that what life’s all about. I know if I’d done forty years at Grosvenor, and I’m sure they wouldn’t have had me for that long but hypothetically, I would not have got the fulfilment that I’ve managed to gain by taking this huge risk.
Susan Freeman
I know you had an Army career before you went into real estate development and do you think that has had an influence in your sort of attitude and your ability to lead a team, you know has it affected your view of the world?
John Hoyle
Yes, absolutely. I mean, certainly the leadership piece is massive. The Army generates of lots of people who are, in the same way as a surveyor goes through the APC and becomes kind of indoctrinated about things that I don’t agree with all of them, a, you know an Army officer, having done 44 weeks at Sandhurst, comes out indoctrinated in other ways but does inherit intrinsic ability of leadership and management and that’s a skill that’s really transferrable into real estate. As a young Platoon Commander, you leave Sandhurst, and I was you know within, well immediately in charge of a platoon of 30 men who were all tougher, physically stronger, more experienced than I and knew each other, you know they all lived together and you know my Platoon Sergeant who would have been early 30s and I would have been sort of early 20s, technically I was in charge of him and of course he was twice the soldier, probably ten times the soldier I was at that stage and I think that kind of skillset is something that the real estate world needs because I mean particularly if you’re, I did a lot of development management as well in my career, you’re basically managing teams of experts, all of whom know a lot more about what they’re doing in their specific role than you ever will and the ability to lead people like that if they’re older or more experienced or just cleverer, is a skill and I’m always a bit sad that so many, the barrier to entry into the world of real estate is often being a surveyor, which I think is a shame because I think there’s lots that particularly Army officers, and other skillsets, can bring to our sector.
Susan Freeman
No, that’s, that’s interesting because we you know talk about you know wanting diversity and different skillsets but clearly, you know having had an Army career gives you an entirely different skillset. So, you made the decision that you were going to set up Sook and you went for it and you had this vision but that was 2019 and we know what happened in 2020, Covid and lockdown must have just completely stopped you in your tracks just as you were starting. How did you cope with that?
John Hoyle
Well I think we were lucky in that timing respect and timing is such a huge part of entrepreneurship. So we had a small team at that stage, so we weren’t dealing with the kind of pressure on payroll that let’s say you know, I think Appear Here experienced and that allowed us to continue to germinate the Sook idea and we emerged from that first bit of the pandemic with an Edinburgh site, our first London site with Grosvenor on South Molton Street, a second deal being done with Derwent on Oxford Street, so actually we were a bit more credible, we had, although it had been shut, this L&G site, Grosvenor site, Derwent site and why it be and I was able to raise money and it seemed obvious I think to people that real estate was going to be under enormous pressure and that solutions like Sook were needed. That didn’t, interestingly, necessarily change the attitude of asset managers. It did for a bit and then it they were like “oh, it’s all going to go back to normal” and the agents were talking it up and guess what, it hasn’t gone back to normal. There have been some good news stories but all of the fundamental challenges persist and vacancy just keeps on growing.
Susan Freeman
So, in a way it put more pressure on the retail sector and people were having to look around for different solutions.
John Hoyle
Well, we’re in a similar place now, I mean it’s a tough time to be a startup because in the year post-Liz Truss and then with Silicon Valley Bank, Credit Suisse, cost of living etc., it’s hard for startups to raise investments, so if you’re pre-profit it’s a scary time to be a startup but the opportunity for anyone that’s focussing on disrupting a big sector like retail, it’s just got monumentally bigger because those who are denying that change needs to happen really haven’t got a thing to stand on, it’s so obvious that we need to look at things differently and that presents massive opportunity and it’s not lost on me either that you know the Airbnbs, the WeWorks, in spite of their mixed reputation, they all emerged out of 2008 and what we’re trying to do is very similar to what they’re trying to do, just with the most resistant sector it seems to change and we fully expect that serviced offices, fifteen years ago, you know service offices didn’t really have covenant strength, landlords were very resistant to them and now they are booming and we fully expect that to be replicated in retail over time.
Susan Freeman
I have to say, personally, I don’t buy the idea that retail is dead, I mean I think people enjoy shopping, they enjoy something new, they’re always looking for, you know the next new thing and you can do so much online but you know people actually want to go to shops as well.
John Hoyle
Definitely and they want to do you know enjoyable things, I mean I’m happy to admit that I historically have not enjoyed shopping that much because of the vanilla nature of our high streets, all the same experiences, there’s no particular impetus to get into those shops because the offer is quite similar throughout the year and that’s, that’s why you know Sook excites me because we’re event led, it’s all about brands shining at the right times of the year for themselves, which makes it much more relevant in terms of the experience and it’s doing all sorts of things that aren’t about retail and that really you know, really excites me, why can’t a shop be a showcase for sport, why can’t it be a community asset, we’ve had everything from Corona testing, which is not that exciting but was very relevant at a point in time, to you know letting a guy turn one of our spaces into a shrine to his girlfriend and proposing to her. So much more exciting than I don’t know, wondering around a Gap and you know their struggles to me are a perfect case study in how a static and consistent ten year retail model in any given location is not what the future’s going to look like.
Susan Freeman
It’s amazing how these retailers though can turn things around or go downhill and sometimes it can just be you know the wrong buyer, you know just the wrong products in store but you I think mentioned the digital side of how somebody actually sort of takes one of your units and I remember when I first spoke to you about Sook and you were talking about digital wallpaper and I thought what is, you know what is digital wallpaper but say, you know somebody just wants to take one of your units for the morning, how does that work? How do they sort of fit it out? How do they brand it?
John Hoyle
Yeah, we’ve got a tool on our website you can go and drag and drop whatever concept you want onto the walls and when you turn up for your booking, it looks exactly as you want it to. So, you know we’ve got 40 tiles of different lighting hues in our Oxford Street space, a furniture solution that you can make bespoke to your needs, you can set up incredibly quickly, it’s all self-serve, we find that first time users need a little bit of an arm round them but actually in all of our sites, you can access it yourself using QR codes and instructions that those give you, you can set up a shop without any interaction from us and that’s kind of the whole point, we want a portfolio of spaces that people can use and learn from and it’s analytically driven so you’ll learn what’s worked in which location and you won’t stop having to make decisions on a kind of gut feel basis. We’re trying to provide effectively an online experience in real life and then there’s a whole host of value add elements that we can give to bigger brands and smaller brands around instalment, staffing. Even an agency piece around you know making that experience really exciting and it’s all about efficiency really, as boring as that sounds. If you can make a month’s worth of sales in a weekend and just only spend money on a weekend’s worth of physical exposure and we find by, because people get that, they then put a lot of effort into making that weekend spectacular and everyone has a much better experience and it still drives more money for the landlords because people will pay a premium for that flexibility.
Susan Freeman
So, the rate at which you charge sort of depends upon the when, so would weekends be more expensive than for instance you know a weekday?
John Hoyle
Yeah, if you think about next time you fly to wherever you like to go on holiday and you try and get a cheap flight through EasyJet or Ryanair, our pricing works like that, it’s demand based, it’s cheaper on a Monday in Leeds than it’s going to be in Oxford Street on a Saturday and you know if you haven’t got a big budget then take the cheap option and drive your own footfall. If you still think that you need to be on Oxford Street on a Saturday, it’s going to cost you more money but that’s your decision and we’re not going to tie you in for years, not even weeks, so you can test and learn and we think that actually over time we’re going to be able to disprove this, I say, kind of gut feel approach that you need to be in certain locations, that’s what’s so exciting about this moment, the future of work’s completely up in the air, maybe better off being in Guildford than you are being on Oxford Street, who knows, I mean that’s the exciting thing about this moment with traditional kind of asset managers. Investing in huge amounts of concrete and still which of course are getting a hugely bad rep from a carbon capture perspective, is it not better to think of how you can use existing assets in all sorts of places that you wouldn’t naturally associate with retail and maybe we’ll actually uncover some learnings that are way more efficient for your brand or whatever it is you want to use physical space for.
Susan Freeman
So, what’s most surprised you about this because you go into these things with certain sort of you know preconceived ideas about how, you know how it’s going to work out. What have been the biggest surprises?
John Hoyle
Gen Z I think, in a nutshell, a whole group of people that I don’t have anything really in common with, I haven’t got any Gen Z kind of natural buddies and you know I didn’t feel like I was old and I’m 44 but I am, I was completely out of touch with this incredible generation of people and the reason I think they’re incredible is because they, well they’re so different from the 20 year old John, both in terms of outlook and also opportunities and I’m not saying they’re perfect but I couldn’t think of what to do with myself after university and so I ended up in the Army. Like, if you’ve just spent kind of two years on your phone in the pandemic, the self-starter version and we’re seeing hundreds of them, have worked out how to make a business at 20 and not just a you know like a lemonade stand that makes you a couple of quid, like thousands of pounds driving things online in a way that none of us older generations understand like they do and it’s, you know there’s often, and Millennials got it too in the day didn’t they, there’s often sort of this kind of narrative that Gen Z are lazy and I just, I mean it’s so incorrect. They’re not lazy, in fact they’re very entrepreneurial and they’ve got tools available to them that they understand really well that we didn’t have, which is actually allowing a incredible level of entrepreneurial growth that we need to pay attention to because you know I think from a retail perspective the brands of the future inevitably sit with young people but they’ll also be done in a completely different way to you know a retail brand that might have managed to get some like private equity backing back in the day when it had a dozen or so shops. In the old days, the PE guys would be like go and expand rapidly, go and get capital contributions from landlords and take ten year leases and pay a lot more in the back end of those leases because that’s what will encourage the landlords to give you capital contribution, scale your business off the landlord’s balance sheet basically, guess what the private equity guys have sold before it gets to anywhere near year ten at the least. And that was a very you know a formular that people understood around our I’ve got to be in this location, the footfall is X, the price of one of my products Y, therefore Saturday will drive enough revenue to make all this profitable. Gen Z do not think like that. Firstly, the PE model probably doesn’t exist anymore because it’s been exposed by many charlatans as a not particularly effective way of growing retail, which has a high casualty rate anyway. For the Gen Z guy, they’re doing it all online, it’s very sustainability focussed, they’re quite angry with all of us for what they perceive we’ve done to the planet, they’ll order stock once someone’s bought it and only at that point, so their cashflow is completely different to the model where we put thousands, billions of pounds worth of garments on shelves and then only sell 40% of them. And then I think the other bit that’s really interesting is that it’s, again people have different views on this but it’s quite individually led, which in one way feels a bit almost a bit cringey, a bit narcissistic but in another way it’s a lot more authentic than paying a third party branding consultancy to create your brand and make it authentic and I’m really interested to see how with the sort of ChatGPTs etc., how that’s going to drive because I think this idea that you rely on someone else to build the brand for your business is becoming obsolete rapidly as you know Gen Z are part of their brands, they live for their brands and you can personify most of those brands with the founders, which is very interesting and a different way of doing stuff.
Susan Freeman
And are there any particular examples that our listeners may have heard of or you say because the listeners possibly aren’t Gen Z, they may not have heard of the brands.
John Hoyle
Well that’s the thing, I’m not sure they will have heard of them. I don’t know what your, the breakdown of your listener base is but you know to give some names that are people I’d never heard of so, good one is a girl called, who’s a regular customer at Sook called Abbie Roberts, she’s got about 20 million followers on TikTok. Do I need to explain what TikTok is?
Susan Freeman
No.
John Hoyle
Of course not. But you know she makes money through Depop, through music, there’s a heavy sort of makeup artist thing going on with her sister, huge amounts of followers, they’re like celebrities, she was on tour with Billie Eilish, so it’s not clear what she is, musician, she’s a huge advocate of human rights, so when Joe Biden pulled out of Afghanistan, she took our space and raised money for War Child. I mean, I can’t imagine doing that as a 20 year old, so really interesting kind of, she’s like a hybrid of all sorts of different commercial angles. From the Instagrammers, we had a group, one’s called Olivia Neale, one’s called Flossie, one’s called Looking for Lewis, which doesn’t even sound like a proper name to me. These guys are massive, you know, got a couple of hundred thousand followers each, they again were raising money for Teenage Cancer Trust, brought Oxford Street to a standstill. So there’s that sort of sector which is interesting. There’s a whole gaming sector – don’t ask me to name any names there but I imagine they will be completely foreign to this listener base because they are foreign to me but don’t forget that Call of Duty, the latest Call of Duty sold more, drove more revenue in it’s first weekend than the three Godfather movies had done in all time, I mean it’s extraordinary on a commercial level how big this stuff is and we’ve never heard of it. And then Depop, you know, Depop was one that maybe people will have heard of a bit more, I mean it’s an aggregate of all of these things, bought by Etsy for 1.3 billion I think it was last year or maybe the year before, it’s probably not worth 1.3 billion this year but that’s not Depop’s fault, it’s more the markets fault. Completely different way of doing retail. Heavily sustainability led and this is the stuff that’s going to populate our high streets in years to come.
Susan Freeman
So, these businesses would take a Sook unit and then use social media to drive you know people to the unit, so they know what’s happening, they know when to come because that must be fairly key if the unit’s not open all the time, people need to know when it’s, you know when it’s there and when they should come.
John Hoyle
Yeah, exactly, I mean when you think about it, if you’ve got 200 odd thousand followers on Instagram, as we’ve seen you can literally, I mean we had the police furiously trying to drive away the crowds for one of these activations, ironically at a time when everyone was moaning there was no footfall because of Covid, and you know 200 thousand followers as I understand it is not that big, I mean I mentioned Abbie Roberts sort of 20 million. 0.1% of her followers turn up, which is pretty achievable and you’re driving them to a shop and all of them want to come in, so it’s not like your traditional you know is it 2 to 3% of people look in the window of a shop, about 1% actually walk in. She’s driving 0.1% of 20 million and 100% of them want to come in, so just in terms of conversion rates, it is incredible effective, the challenge is actually getting all those numbers through the shop which is kind of, that’s a retailer’s dream, isn’t it.
Susan Freeman
Well, yes, it can be, I suppose it can be a nightmare if there are so many people. So, are you thinking in terms of timed entries because I don’t know how you manage so many people wanting to come into one shop?
John Hoyle
No, I mean it can be challenging. We love the queues because they’re great for social media, funnily enough, you know and you can rent a queue off us if you don’t have that following, we find 5 or 6 people outside a shop, which costs £16 a person per hour by the way, drives footfall just like livestreaming does, so it’s all sorts of ways of appealing to humans walking past beyond a shop window but in terms of the timed entries I mean, yeah, it’s great having those queues and we find our own social media goes through the roof when people are like “what’s this thing that I’m queueing outside for?” but you know appointment based, as I would call it, retail I think is also a very effective way of looking at retail. Last year we did a roadshow with HydraFacial which is, at sound, a facial business, massive US facial business, and of course that’s really efficient because people book in advance and they don’t necessarily need high value retail hours. It’s harder to do with a retail brand on a Saturday but yeah, I mean why not just make sure that people are there at the right times and bring your customers through FOMO or offers into whatever exciting activation’s going on and then get them out.
Susan Freeman
So, as well as these like smaller sort of up and coming brands, you’re also attracting some of the sort of well known brands as well which may not be what you had expected. So what sort of bigger brands are actually coming to Sook?
John Hoyle
Yeah so, I mean last week we had Adobe, who obviously do photoshop amongst other, it’s a huge platform, that was in collaboration with a business called Enterprise Nation and they were using it to support small business. We’ve had similar collaborations as that with SumUp, Uber, Mastercard and that’s really interesting seeing big brands sort of clambering to be part of the authenticity of smaller brands because they understand that you know these small brands actually have a power that they can’t ever have, so that’s great. I mean we’ve done activation with traditional retailers like Radley, we’re, I think I can talk about Pandora looking, big Pandora activation, TikTok, that’s obviously not a sort of traditional retailer but they’re trying to boost online sales through TikTok Shop, we’re doing multisite activations with them, as we are with Depop and then the one’s I didn’t necessarily expect were you know like the homeware ones like Quooker, the hot water tap, which has been really interesting and you know there is no limit really to what we can incorporate. The football clubs, I’m excited about as a sports fan. We’ve had Allan Saint-Maximin of Newcastle United, we’ve had Hearts, Midlothian, we’ve got an activation with Southampton FC coming up, in spite of their unfortunate relegation, in our Southampton site, so yeah, I want this to be a space for all sorts of things. The bit that I personally have least in common with is actually fashion, I’m not a very fashionable person and everyone thinks about shops and fashion but of course shops are a whole spectrum of other opportunities.
Susan Freeman
No, it’s fascinating and in terms of the income when you make a retail unit available in this way, from a landlord’s point of view can it be as profitable as leasing on a five year, ten year and even longer lease as they used to be?
John Hoyle
Yeah, it can be more profitable, much more profitable and that’s you know my frustration with the sector is that there’s still a desire to stick with the old way because that’s how people value assets. All they’re interested in is what’s the guaranteed income in year ten or as far away down the line as possible and you know that’s great and that’s worked for many years and I understand how that’s helped retail grow as an asset class and protect all sorts of you know financial I suppose institutions, you know pension funds, insurance companies etc., which are important, so I don’t want to tear up that, that really important economic foundation in our developed markets but at the same time there is a slight absurdity that three times the income today is worth less than a third of that income just because there’s guarantee that that income lasts longer. I understand the desire to match risk with you know the debt requirements of some funders for instance but what we’re trying to do is build up enough of a covenant strength in inverted commas but I am showing a track record that consistently achieves more than a headline rent, that landlords will be like oh okay, well I can pretty much book that as guaranteed for as many years as I’ve got Sook in this unit and obviously that just takes time to build that confidence and to change the attitudes of a sector that’s been under pressure so much in the last four years, quite a lot of the asset managers have just sort of dug themselves into a little hole and put their fingers in their ears and hope it’s all going to go away, supported by an agency kind of layer of defensibility that doesn’t want to change because it hasn’t figured out how to make money in a different world, so I think we’re at that inflection point now, I think there is so much pressure on commercial property, retail real estate to be more transparent about how it’s valuing property, that you know there’s an opportunity for us to play in you know 10 to 15% sector of the market without scaring off all of the traditional customers that are so important to landlords.
Susan Freeman
And do you think there are places that are getting retail right yet or are we still feeling our way?
John Hoyle
Well there, yeah, there’s, there are always brilliant examples of success and you know I know prime central London is a bit of anomaly but you can see how Shaftesbury are getting it right when people with, without naming any names, with equivalent sort of streets in terms of stock of shops and accessibility from public transport etc., and desirability in terms of neighbourhood, are just failing and you can walk 400 metres from Carnaby Street to see failure and there’s no excuse for that because it’s just 400 metres. So, yeah there’s, there are some brilliant landlords doing brilliant things and I don’t think it’s actually doing any harm putting them under more pressure to be a bit more inventive. I’d like to see the RICS get a bit more organised, I mean as an organisation they’ve been all over the place in the last few years and they need to show some leadership in terms of how we value stuff but it ultimately also will be driven by the sources of capital, banks ultimately, who don’t like taking risk and no matter what they say, are pretty disconnected from the ultimate customer in retail to a number of different layers, so maybe it does need a bit more pain for them to think okay, this is actually hurting me financially, therefore we must reinvent it.
Susan Freeman
And did you find it difficult initially selling this entirely new concept and persuading landlords that you know this was something that they should try?
John Hoyle
Yes, absolutely and we were very proud of how much risk we were able to get landlords to take to support us and we’re very grateful for that. I mean I get very frustrated with venture capitalists predominantly who, and this is so indefensible John, anyone can do this, and I just think go on then, have a go because it, landlords are hard work, they are not motivated to try new stuff, none of them are incentivised personally through bonuses to take a risk, in fact quite the opposite, better off sticking to what they know, they’ll get a bigger bonus at the end of it, and of course what we’re trying to do is build the market place so you’ve got that challenge of convincing the landlords and then filling their spaces without disappointing them, which is tough, particularly in a market that is, you know the early stage of this year was very hard because everyone just, brands and landlords, just decided to sit on their hands as they reacted to sort of the trauma of Brexit becoming undeniable, Liz Truss’s extraordinary kind of tenure, and all of the other stuff that’s going on in the world from Vladimir Putin to banks failing. Yeah, it’s hard, satisfying landlords, brands and investors all at the same time, in a challenging market.
Susan Freeman
And we’ll talk about Liz Truss in a minute but you seem to have persuaded some quite sort of high profile landlords that you know this is a concept that they should be working with so, I mean which landlords are you partnering with now?
John Hoyle
So, we work with Grosvenor who have been brilliant to us and obviously it’s been helpful that I had an existing relationship with Grosvenor, Derwent, Hammerson, Rivington Hark, Inca, Nuveen and sorry landlords who I’ve forgotten but about five or six others. Generally, oh Landsec, we’re just starting a new relationship with Landsec, which was quite pleasing because essentially they copied us and said you know, were convinced that they could make our model work and have now, eighteen months later, said to us can you come and operate these sites for us, which is really pleasing because it just shows that we do provide a massive value add to landlords that they find really hard to deliver on their own for all sorts of reasons, so yeah, I see us very much as an asset management tool that transparently supports landlords’ revenue and takes some of the pain away from huge amounts of rates, liability and empty shops.
Susan Freeman
We’ll talk about rates in a minute as well but I know that the last nine months or so have been pretty traumatic for you both on a personal and business level so, maybe, you know if we could just talk about what’s happened and you know how you’ve got through it and how that’s perhaps sort of slowed down all your plans and expansion plans for Sook.
John Hoyle
Yeah. Well so, the UK investment market was softening throughout last year and the Liz Truss mini budget just was the moment the tide went out incredibly quickly, which for all startups you know sort of pre-profit environments was really tough. We had ramped up to 45 people because we’d launched to Series A in September and three-quarters of it committed, you know we had money to spend so we hired and we hired aggressively, not seeing what was about to come. We then had to cut our team in half, which was extremely sad and painful and from a personal element, it coincided with unfortunately, my wife started to lose her battle with illness and sort of found out around the time of Liz Truss’s mini budget that she wasn’t going to make it to Christmas. So we then were in a very tough spot as a business, I was getting dragged more and more into the hospital which is obviously exactly where I should have been but made me feel quite impotent in terms of being able to help at this time and we actually ran out of money in about the same week that my wife sadly died and it’s been an incredibly testing period personally and professionally. Luckily, our team have been amazing, you learn an awful lot about people, good and bad, in those situations and not everyone’s been good, there are a few people that have left our business and we’re pleased to see the back of them but generally, the team has been unbelievable and we’re only standing because of them because I, you know I spent months in a state of grief effectively. I’m pleased to say that we’ve, we weathered that storm and we’ve taken, I mean I think we should be really proud of the versatility we’ve shown to stay alive, it’s one of the big battles of entrepreneurship, don’t give up. I don’t know personally, I don’t really remember December or January that well, it’s all a bit of a blur but it weirdly, I’d say we’re in a perhaps a better position now having been through all of that pain than we, than we were at the outset and I look forward to kind of getting back into kind of full blown expansion mode when we finish our fundraising soon. And from a you know personal point of view it’s, it’s amazing for me to have a sense of purpose, I think if I’d lost the business as well as my wife, who you know was so intrinsically involved in the business, I would have found that even harder than I have found the last few months.
Susan Freeman
And you’ve got a little boy that you mentioned at the beginning of the podcast, who was responsible for the black eye, so how old is he now?
John Hoyle
He’s three and he is a joy and again, he’s another, he’s a bit like Sook really, he’s hard work but he gives me an awful lot of purpose and kind of comfort, as the kind of grieving process continues, like any three year old, takes a lot of time, punched me in the face over the weekend, today he’s very excited because there’s a tractor digging up the road outside so he’s not giving me too much drop.
Susan Freeman
No, he must be quite excited by the black eye actually and know he was responsible for that. So, it’s been an incredibly tough, you know tough time for you and I know, you know I saw your posting on LinkedIn so I knew what was going on and as you say, it is good to focus back on Sook and I know that you now have expansion plans so, what number of units are you aiming for and are you staying in the UK or are you looking at international expansion?
John Hoyle
Yeah, so, we’ve been slowed down in terms of the international expansion because we’ve got five sites identified in the UAE with 42.51 scale up programme with them. We had our first North American site ready to go just pre-Liz Truss and we’ve put that on ice. We want to have 160 sites in the UK, we’ve currently got 13. I mean, back in July pre, as I say pre, must stop mentioning the Liz Truss word but pre-Liz Truss, we opened three sites in July just to prove that we could, and we can, we’ve got the capability to do that so there’s not much holding us back other than economic sentiment to open everywhere and we do have a first franchise site opening in South Africa in, imminently, I think it might be June, possibly July in Mall of Africa, where effectively we’re licencing our products for the first time to a landlord there operating it. There’s no cost risk for us and it’s in a market that we feel we can take some risk but it’s not, we probably wouldn’t take this approach in America for instance, which is one that we want to get right and not take any risk but it’s really exciting because we found that we’re already getting lots of international brands wanting to be in our UK stores and so having a space in South Africa actually is likely to drive a lot of South African brands that we’re already seeing who want to sell to customers in pound sterling rather than the Rand and that network effect is really important to our business, the more sites we have, the more customers, the more crosspollination there can be between sites and brands. So, excited to see how that goes.
Susan Freeman
And in the UK, your sort of move, I think you’ve got a site in Leeds and are you looking to sort of move more around the UK?
John Hoyle
Yeah, we’ve got two sites in Leeds now and Leeds is a really exciting place obviously but it’s a balancing act in terms of our expansion between, I mean London we find it easy to do and it’s easy to fill, to make money, some of the regional ones are harder with the Tier 1 brands but there is a comprehensive sort of Tier 3 which is our, you know the brands that you haven’t necessarily heard of. You know, the goal is to be able to drive success everywhere. We’re aiming to be a mass market solution but it’s fair to say that it’s at the moment just because our marketing reach has been I suppose like any startup a bit limited and limited certainly by budget in recent months but London’s the one that we find really easy to drive successfully in economics.
Susan Freeman
And I know when you started Sook you were thinking in terms of you know social impact and community and that sort of thing, are you able to measure from the data that you collect the impact that your units have on the local community?
John Hoyle
I think I’d be lying if I said we did that effectively today other than to be able to point towards occupiers that otherwise would not have a space but of course that is integral to what we want to do, I mean why can’t a shop be the town hall of the future, they’re brilliantly located in terms of infrastructure and you know town halls are really inefficient as well, they get used for like voting and kids’ parties and occasionally have like parish council meetings so, yeah we want to get a lot better at the community element because it is so important. Landlords care about the community. Investors, prop tech investors at the moment because I think they’ve just struggled to make investments in software products around real estate work have pivoted hard towards climate, it’s a bit of a, I mean they’d never say it’s because they’re not succeeding in the other areas but I think it seems to be a large focus, the decarbonization of real estate is the buzz at the moment and so for the impact investor they care much more about the, the environmental impact of our fit outs and obviously sharing a shop and a fit out that can be reused is brilliant for that. They seem less bothered about community uses, which is a shame because that’s really important to me.
Susan Freeman
And I know that you know you have spoken in the past about you know business rates and the negative impact they are having, I mean do you have any thoughts as to how business rates should be rejigged.
John Hoyle
Well, I mean obviously they are something that people have moaned about for a long, long time and they’re not fit for purpose but on the one hand I do get frustrated when landlords use business rates as the excuse. Ironically, as rents tumble, business rates aren’t tumbling with them and I’m sure won’t. There clearly needs to be a better solution, create a level playing field across digital and physical retail but given that no one’s really found a solution for turnover rents, effectively particularly when brands have got an online presence, I’m not optimistic that a government or local authority is going to do a better job than a plc landlord which has degree of expertise. So, I know this sounds deeply pessimistic but we built our whole model of assuming that nothing’s going to change with business rates at all because I think that cynical approach is smart and because if someone does get it organised at some point, and Rishi Sunak’s got no interest in it, Boris had no interest in it, I don’t know what Keir Starmer’s view on life is but it will be a bonus obviously to us if, if that gets organised but I’m not optimistic.
Susan Freeman
I think it’s, it’s complicated isn’t it so the easier thing is to just leave it as it is and obviously it’s a good source of income. So, how do you think retail will look in say, I was going to ask you about twenty years’ time but that does, that’s rather a sort of long time horizon, but you know in ten years’ time, are we going to see retail looking sort of very different from how it looks now?
John Hoyle
It won’t look completely different but I think 30% of the physical retail model will be operating on a basis that has similarities to a Sook. In ten years, yeah, it will be about half of that. There’s always going to be room for the business model for the big brands, you know and the grocery stores are not necessarily going to change, they might compress a little bit but they do need to have a seven day a week, ten year view on life. I think there is going to be a massive reduction in the amount of stock that you see in shops because it’s so easy to get stuff delivered at home and the way stock is dealt with at the moment across not just fashion but all sorts of retailers, so inefficient, why would you produce so much more than gets sold and it end up in landfill, so I think those environmental credentials will change things. And I also think we will continue to see the sort of demise in the vanilla shopping environment, both high street and shopping centre, and the ones that manage to source a little bit of individualism will thrive because of you know the character and the interest that that entails. And then the final bit is that we’re going to see some incredible new brands but they’re gonna be resolutely focussed on online first and IRL second. IRL will be really important but you know they want flexibility, they want agility, they want to be digitally led and their business model is really important to them. I just don’t see the Gen Z brands, other than you know like a flagship, like Gymshark have just done on Regent Street, wanting to have a New Look style, 411 site portfolio, just it looks to them like a huge headache and if you talk to the New Look guys, they’d probably say “yeah, it is a bit of a headache”. And the final piece is just around turnover, building on that New Look, you know as these, the big incumbent brands go through CBAs and there will be more coming, you’re getting to a scenario where a huge chunk of the landscape is on turnover basis now and then you’ve got Mike Ashley being quite provocative and buying his own retail so that he can influence values because he’s sick to death of being dictated to by landlords and I think those things combined are just going to erode landlords’ negotiating position and if they’re not onto that and thinking about that now then they’re going to find themselves in real difficulties if the tide comes out because it’s just not enough to keep doing things the same way that asset managers have acted for the last twenty years. They need to wake up and do things differently and unfortunately that is harder work than just signing a lease, getting an agent and a lawyer to do all the work and then just looking at what your capitalised value looks like until you go and put the rent up five years later. They’ve got to get in touch with their customer.
Susan Freeman
So, how do you think Oxford Street is going to end up looking because obviously the department stores have largely gone, you know retail has been going? Are we going to see more food and beverage? Are we going to see more Sook type units? What will make Oxford Street work again?
John Hoyle
I mean they’ve been talking about it a long time but the vehicle element does create a challenge in Oxford Street. I’m sure you’ve heard David Kenningham, I was talking to him the other day and he was like you know thinking about Oxford Street is it does have a food core, it’s got Soho and of course the charm of Soho as a sort of food core is all the nooks and crannies and the cool streets that you can find which are so much more interesting than an actual food court in a shopping centre. But I think you know Oxford Street’s been dealt a huge blow by the tax breaks around retail and that’s not coming back is it, not matter what anyone says, well maybe it will be I’m not hugely optimistic about the western end of Oxford Street, those big format stores, I think that’s gonna be quite bleak and it’s also not particularly well served by community, you know Mayfair is not your obvious source of footfall for that end of Oxford Street and even the office kind of congregation around on the north side of west Oxford Street is not particularly supportive but I am actually a lot more excited about the Tottenham Court Road end which I think has got some really interesting activations going on, I think there’s some really cool anchors there and it feeds much more into Soho which retains this excitement and delights which is what gets people to these places in the first place.
Susan Freeman
No, that’s, that’s interesting because that end of Oxford Street has always been like the poor relation and is now benefiting from Crossrail and everything that’s going on there. Yes, so that’s an optimistic note to end on I think John, so that’s been really interesting. So, thank you very much.
John Hoyle
Pleasure. Thanks for having me.
Susan Freeman
And I hope to see you again soon without the black eye.
John Hoyle
Alright. Thanks, Susan.
Susan Freeman
Thanks a lot.
John Hoyle
Bye.
Thank you, John. It was so fascinating to hear what drove you to set up Sook as a completely new way of occupying retail space and the challenges you’ve been facing along the way.
So, that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.
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