Northumberland Street: its central location has made it a magnet for big fashion retailers however, it has posted nil rental growth in the past two years
Newcastle’s regional retail crown is slipping. In 2004, Cushman & Wakefield’s Main Streets Across the World survey ranked rents on the city’s prime shopping pitch of Northumberland Street the most expensive in the UK outside London’s Oxford Street.
The Tyneside capital’s renowned appetite for shopping, combined with the street’s central location and its compact size, made it a magnet for the big fashion retailers, and drove rents upwards.
Two years later, however, C&W ranked the street first-equal with Manchester’s Market Square, and one of only three streets out of a dozen to post nil rental growth.
Even more alarmingly, boutique fashion retailer Zara, after three years on Northumberland Street, is set to assign its lease to Carphone Warehouse after a difficult period of trading from its 6,000 sq ft store.
The Spanish fashion chain says it will wait possibly until 2010, and the opening of Capital Shopping Centre’s £170m extension of Eldon Square shopping centre, before it re-establishes itself in the city centre.
So what is wrong with the city centre, where retailers, including Selfridges and Harvey Nicholls, continue to have outstanding requirements for space?
Simon Hawkins, retail specialist with Knight Frank in Leeds, says: “The constrained nature of the city centre means it has a tight shopping core. Historically, there has been little new retail development. There are many unfulfilled retailer requirements still in the market, and it is unable to provide the large floorplates required by the national retailers in the prime shopping pitches.”
Bob Fletcher, retail director at Sanderson Weatherall in Newcastle, says the progress in zone A rents -from Zara’s £306 per sq ft in August 2003 to £330 per sq ft in a letting to T-Mobile in January last year – masks a deeper malaise.
“The units on Northumberland Street are very wide, which means that the pure zone A figures are very misleading. The zone A rates may be around £300 per sq ft, so retailers are paying a huge amount for what is a very small space because they are wide at the front and not that deep. They have a disproportionate amount of zone A space.”
David Furniss, head of Atisreal in Newcastle, believes rents have reached a difficult level for retailers.
“There is a ceiling at any one time above which it is pretty hard to make any money. I do not think that rental growth has stopped so much as the market has caught up with it, and the situation has taken time to unravel.”
Capital Shopping Centres’ final phase of the redevelopment of Eldon Square, a sprawling 960,000 sq ft shopping centre built in 1976, is expected to address the shortage of appropriately sized units with 420,000 sq ft of new space.
Multiplex’s long-standing plans for the retail-led renewal of Pilgrim Street, seen as a 1m sq ft extension to Northumberland Street immediately to the north, although at an earlier stage, is also expected to help alleviate the problem.
Property performance
Prime retail property performance could slide further in the meantime.
“Unless the market improves dramatically, which I don’t see it doing, then there will be stagnation,” says Fletcher. “It will be very difficult to generate zone A rates that exceed rents. The thing that will counterbalance that is the lack of new units that will be available.”
Building works due to begin at Eldon Square in June are expected to divert footfall into secondary retail areas, such as Grainger Street, Market Street and the top of the offices-dominated Grey Street.
“Rents in those areas are half those in Eldon Square and Northumberland Street,” says Fletcher. “We will certainly see a dramatic improvement in those areas.”
According to some estimates, there are up to 800,000 sq ft of retailer requirements for space in the city centre, including those likely to arise once Multiplex’s plans for Pilgrim Street emerge from pre-application talks with local planners. “Even if you take half the published requirements and put them in a pot, that is a huge amount,” says Fletcher.
While local agents hope that both schemes bolster the city’s retail core, each will have to compete with the out-of-town market, itself boosted by the extension of Gateshead’s MetroCentre in 2004, and a slew of large-scale schemes on the national scene in the next couple of years.
Ken Gunn, head of property consultancy for CACI, says that Newcastle, in common with many UK regional cities, faces “decentralisation through the back door” from three or four out-of-town retail parks with large high-street retailer tenants.
“Something would have to go seriously wrong for Newcastle to slip very much further down the rankings, and we do not expect that to happen,” he says. “But there is a huge amount of development. There are fewer occupiers to go around, and Newcastle risks slipping down retailers’ priorities. If it takes its eye off the ball a little bit, it starts to become more of a problem.”
| Newcastle: retailerrequirementsZara is set to relinquish its lease | |
| Retailer | Space (sq ft) |
| Selfridges | 150,000-200,000 |
| House of Fraser | 100,000-200,000 |
| Next | 80,000 |
| Arcadia | 40,000 |
| New Look | 30,000 |
| H&M | 10,000-20,000 |
| River Island | 10,000-20,000 |
| Wynsor | 6,000-12,000 |
| Fabric | 6,000-10,000 |
| Warehouse | |
| Factory Shack | 6,000-10,000 |
| Zara | 5,000-16,000 |
| Peacocks | 5,000-15,000 |
| Urban Outfitters | 5,000-10,000 |
| Puma | 5,000-10,000 |
| Fort Asylum | 5,000-10,000 |
| Klaussner | 5,000-10,000 |
| Furniture | |
| Café Rouge | 3,500 |
| Fopp Records | 3,000-10,000 |
| Superdrug | 3,000-8,500 |
| Republic | 3,000-8,000 |
| Joy | 3,000-4,000 |
| New Heights | 2,500-12,000 |
| Poundland | 2,500-10,000 |
| Diesel | 2,500-4,000 |
| Austin Reed | 2,500-4,000 |
| Bank | 2,500-2,800 |
| Gant | 2,300-2,500 |
| G Star | 1,500-3,000 |
| Card Warehouse | 1,000-2,500 |
| Sassoon | 1,000Source: Sanderson Weatherall and Atisreal |
