Chain reaction Supermarkets have not tended to be seen as the ideal shopping centre anchor but, with the shifting financial climate and an increasingly blurred line between fashion and food retail, that is set to change. By Nadia Elghamry
A tin of baked beans, six toilet rolls and the latest fashion must-have – this is not how most fashionistas would imagine their perfect shopping spree. But as more and more supermarkets become shopping centre anchor stores, is it time for shoppers – and developers – to readjust their perceptions?
Food retail anchors are common across the world, but the practice has yet to catch on in the UK (see panel, p17). Centres that have one tend to be viewed as second-rate – the sort of place where you are happy to pick up your weekly shop and nip to the post office, but not somewhere for serious retail therapy.
But should that be the case? Food superstores have long ceased to be somewhere just to pick up your weekly grocery essentials and have become mini department stores in themselves. But old perceptions die hard.
Can a food store really work as an anchor for a fashion-based retail scheme, or will clothes retailers turn their noses up at being next to a supermarket? Could this ultimately lead to two distinct styles of mall – one fashion- and restaurant-led, the other by food shopping?
The change is, in part, being fuelled by financial constraints. Developers are increasingly unlikely to pay the huge incentives demanded by some fashion retailers, believes Jonathan Newns, partner for in-town retail at King Sturge in Leeds.
Pointing to the likes of Arcadia, Newns says: “They’ve wanted between six and 12 months rent-free now, that has jumped to two years-plus. Next is probably asking for £1m, and someone like John Lewis will get between £5m and £6m.”
By comparison, food stores do not need the big incentives. “They’ll come in and take 100,000 sq ft of space and generate a massive footfall,” says Newns. “The supermarkets are trading well, and in very difficult times they’ve become the Marks & Spencers of the world.”
But how do upmarket retailers feel about being next to a food store? Jeremy Collins, head of retail development at John Lewis – and vice-president of the BCSC – says that this is something his firm weighs up carefully. “If it was a credible food and comparison goods provider and the car-parking was done well, then it’s fine,” he says, “but the quality of the proposition is an issue which we would need to work with.”
It is not purely a quality issue, though. Collins explains: “Ultimately, there are only so many retail pounds in any given marketplace, and on a very simple level the supermarket could be competition – especially as many of these so-called food stores have become a department store with a food offer.”
Yet a food store need not lower the tone of a centre. This is something that John Lewis knows very well. It opened its own version of a department/food store in 2002 in London’s Docklands, where its Waitrose Food & Home concept anchors Canary Wharf’s Canada Place mall.
“That shop has been incredibly successful for us, and it has driven a higher density for the home side of the offer,” says Collins.
Yet Waitrose Food & Home could hardly be accused of bringing down the tone of the centre, featuring as it does an oyster and wine bar, a steak bar and a sushi counter with a conveyer belt.
The partnership has built on this success with its 30 October opening of anchor store Waitrose Westfield at Westfield London in Shepherd’s Bush, and the opening of a food department at its Oxford Street store, London W1, last year. Collins says that the retailer has seen a 5% increase in footfall at this store since opening the food hall, with 57% of food hall customers going on to visit other parts of the branch.
On the basis of these success stories, the partnership is looking at opportunities to introduce food into more of its stores in “larger metropolitan centres”. Collins says: “We haven’t got any publicly announced or committed plans, but we are currently looking at all the options.”
Notable exception
Generally, supermarket-anchored schemes have not worked in town centres, in part because the car-parking ratios tend to be too low. There is one notable exception: British Land’s £165m St Stephen’s Centre in Hull, anchored by a 140,000 sq ft Tesco Extra. Steve Hadfield, British Land’s asset manager, is candid about the reasons for the choice of anchor. He says: “It was very cheap land, and the fact that it is very difficult to buy a piece of land around there large enough to plonk a Sainsbury’s or Morrisons on, did it.”
The signing of Tesco was one of the first deals concluded at the centre in 2004. “It hasn’t negatively affected other retailers,” says Hadfield. “We’ve still got the fashion anchors, with the largest Zara in the North East as well as H&M and Pumpkin Patch, among others. The centre is a lot stronger than anyone envisaged. When I look at the old leasing plans, it was full of old concepts, and that mix has totally changed.”
As a result, says Hadfield, British Land will definitely sign another Tesco as anchor elsewhere. But he cautions of food anchors: “Generally, I think they are very difficult to make work in a town centre.”
Adrian Oliver, director at developer Vale Retail, agrees that food anchors can actually help sign up other retailers. Pointing to the 146,000 sq ft Cornbow retail development in Halesowen, where Asda has signed for a 75,000 sq ft store, he says: “If not for Asda coming to town with its George concession, we know for a fact that Bonmarché and Peacocks wouldn’t have expanded their stores. Neither would Argos nor Gamestation have taken new lettings, and Thorntons and Clarks would probably have left.”
So will two distinct styles of shopping centres evolve? Peter Courtney, senior director at Lunson Mitchenall, is not sure. He says: “It will be an evolution. In the old days, if a scheme was supermarket-led, it was probably because they couldn’t get anything else.” Today, though, the offer has changed. “Take Marks & Spencer Simply Food,” Courtney adds. “Okay, they are premium, but I don’t know any of the retailers that would see them as anything but complementary.”
However, Courtney offers an interesting twist on the supermarket anchor concept. Increasingly, he believes, food retailers may take it upon themselves to develop. He says: “Supermarkets feel that the development pipeline isn’t going to provide them with the opportunity they need. They have the financial clout and they’ve got the development skills the logical extension is, they’ll take it upon themselves.”
Tesco has already done this. By December, it will submit an outline planning application in West Bromwich for a 140,000 sq ft Tesco Extra, plus a shopping scheme anchored by a 90,000 sq ft department store and a further 217,000 sq ft of retail space.
This could be a cautionary tale for any developers stuck in their old ways of looking at food retailers as second-class: either embrace the new supermarkets, or they may very well take you on at your own game.
Supermarket as mall anchor fails to catch on in UK
Carrefour and Tesco are regular presences in retail centres across most of continental Europe, the Middle East and Asia, but the concept of a supermarket as mall anchor has failed to gain a foothold in the UK.
Andrew Hardy, international director of RED, a developer specialising in retail development in Romania, is blunt. “It’s because the British are not adventurous enough,” he says. “The asset manager on a centre will sign up a 35-year lease with a tenant, then sit back and collect the rent.”
A west Londoner himself, he points to Westfield London’s food offer – both its restaurants and the signing of Waitrose – as a source of inspiration for UK developers. “The Australians had to come over here and show us how it is done,” he says. “If you look at their shopping centres, there is always something new. They move so fast, and that keeps customers coming back.”
RED moved into Romania (see p29) as the country gained accession to the EU. It has a €600m development pipeline in the country, including the 46,500m2 Armonia retail park in the north-western city of Arad, close to the Hungarian border. Anchored by a 13,000m2 Carrefour superstore, it is looking to replicate this format in differing sizes over the dozen or so sites it owns in the country.
Hardy believes that supermarket anchors work on the Continent because of the strong family culture. “Romanians are very much about the family, and food is very important – especially fresh food,” he says. The trend for a family to sit down together for meals and eat freshly prepared food is only just starting to reappear in the UK.
Over in Romania, Hardy says: “Rather than go to the edge-of-town Sainsbury’s, mums needing a bag of rice will also pop in and look at the fashion and the teenagers might go and look at a different shop.”
Moreover, in hard times, supermarkets can provide a useful source of footfall for shopping centres.
Hardy says: “Whenever the market is down, you’ve still got to get your rice and loaf of bread – food is the last thing you cut down on.”
Supermarket formats
When it comes to supermarkets in shopping centres, no one size fits all. Jonathan Newns, partner of in-town retail at King Sturge in Leeds, is finding that supermarkets are asking for “as big as possible” units in the range of 110,000-140,000 sq ft. This is still small compared with deals that his colleagues are doing in Central and Eastern Europe, where supermarket anchors sign up for 200,000 sq ft or more.
Meanwhile, Peter Courtney, senior director at Lunson Mitchenall, reports that supermarkets he has dealt with lately are generally after more modest units of around 40,000-50,000 sq ft and upward.
Yet all agree on one crucial requirement – car parking. Steve Hadfield, asset manager at British Land, says bluntly: “Car parking is essential, because the majority of a food store’s traffic is car-borne.”
This is something planners dislike. On the Continent, large supermarket-anchored shopping centres have been built on the edge of town. In the UK, planners want city- and town-centre developments. Could this be the real reason food-anchored shopping centres have failed to take off here?
Andrew Hardy, international director of Netherlands-based RED, says: “If you are a family shopper, you want a car park where you can park in a light and large space. I always say that if you don’t have a good experience when you arrive and park your car, then what’s going to make you go back?”
