Who Should Manage Markets?
With the phrase ‘Market Town’ proudly declared on road signage across the country and deeply ingrained into the consciousness of local people, the importance of markets for place identity is clear. Markets punch well above their weight in terms of socioeconomic impact, creating local employment, acting as incubator spaces and creating a sense of local pride in place that can rarely be matched by other spaces or types of developments.
However, as consumer habits have changed, in particular the rise of online shopping, the introduction of out-of-town retail parks and the increasing dominance of supermarkets and discount stores, these traditional markets have faced mounting challenges, becoming a pain point for operators since the turn of the millennium.
The evolution of markets has not kept pace with inflationary cost increases associated with the running of markets. An historic lack of reinvestment in the heydays of the 1970’s - 1990’s has meant many market halls now need significant capital investment to maintain the buildings and increasing revenue subsidies to continue to operate.
Amidst a climate of reduced budgets, limited capacity and an evolving market landscape, many local authorities are finding themselves operating markets with increasing taxpayer subsidies and declining occupancy.
With nearly one in five councils at risk of bankruptcy in early 2024, local authorities will face increasingly hard decisions about the future of their markets and whether non-statutory services that require significant revenue investment can be sustained.
However, there are promising signs across the industry, as market regeneration projects have been a major focus of Levelling Up funding, with a growing number of redevelopments now coming online or in the development phase. These new market developments often include larger food and beverage offers, strong independent fresh food anchors, specialist retailers and services, entertainment and evening opening, and require a new approach to management.
This approach goes beyond an asset management style of operating and delivers an agile hospitality focus with an emphasis on marketing, events, business development support, and commercial outputs. Markets operate in an environment in which success relies on rapid commercial decision-making, active marketing and promotions, out-of-hours operation, and the need for a curated approach that ensures a strong vendor mix.
During the strategic planning for these modern market and food hall projects, future management models and regimes are usually explored as part of a detailed commercial and management case in line with Green Book Assessment frameworks and responsible business planning.
As such, the question of ‘who should manage the market?’ is increasingly coming to the fore.
The outcomes of these analyses have meant that a growing number of local authorities are looking to divest the day-to-day operation of their markets to the private sector while retaining strategic control through management agreements and KPIs.
This approach has its benefits, stemming the revenue losses generated by markets and delivering much-needed commercial experience into the industry to deliver on socioeconomic outputs and targets. In theory, councils could offer full-repairing leases on a fixed rental basis whilst attracting private sector investment, making this an attractive option.
However, for local authorities seeking to appoint private sector operators to run their markets, securing a favourable contract which meets their objectives is a minefield.
There are only a small number of national private sector market operators, with the industry often undercapitalised and under-resourced. This means that when procurement is launched for locations outside of major city centres, councils may only receive tenders that expect some combination of full fitout and establishment costs (paid as grants), rent-free periods, guaranteed management fees, and underwritten losses.
Some councils have found themselves in a position of accepting a contract that fails to deliver value for money on the basis of being the ‘least worst tender’, or having contracts fall through altogether.
But this is not a coin toss between the public or private sector. There are myriad operating models for markets, which broadly fall into three categories; local-authority run, privately run and special purpose vehicles (SPVs) for collaboration between the public and private sector. There are local operators, CIC’s, national operators, food hall operators, event management companies… the list goes on.
One option very few Councils have explored, which should be of growing interest to the industry, is the establishment of a wholly owned Local Authority Trading Company, allowing experienced markets teams to operate on the same playing field as private sector companies, while returning profits to the authority.
The optimum model for each market will be very location-specific and will usually depend on the size and reputation of the market, the projected financial outcomes, the timing of the tender, local authority dynamics, local community dynamics, politics, and much more.
If you are considering options for the future, optimum operating arrangement for your market, we can help.
Proactive management can be essential to securing solid foundations for a market, ensuring the space is carefully curated, managed and promoted. Whether a market is preparing to relaunch following a major redevelopment or is well-established and currently trading, strong management can make all the difference in its success and viability.
By providing a detailed list of options alongside an in-depth analysis of their implications and suitability for your specific market, we can support local authorities with an evidence-based approach to the tough decisions around market services.
If you are considering how best to manage your market service and want to better understand the options available to you, the route to market, and how these models have performed elsewhere, please get in touch.
