Mark Simmons consults a cheery cabbie to see what the public makes of the Galleria’s latest look.
“See these trousers? £7.99 from Hatfield market. At that price I can afford to buy a pair every month.” It’s not that the taxi driver is short of a bob or two, he just thinks that prices at the Galleria Outlet Centre are too expensive. However, the father of two – “I’m just off to pick up the wife from shopping,” he says, gesturing to the two youngsters in the back of his cab – is quite happy to part with his cash at the leisure end of the centre. “I quite often go to the cinema on Wednesday afternoons when trade’s quiet,” he confesses.
But then the taxi driver is not exactly the Galleria’s target customer: typically, it expects to attract the female shopper in her mid-30s.
Originally conceived in the late 1980s, the Galleria was designed to serve the then burgeoning demand for upmarket clothing and expensive knick-knacks.
Carroll Group completed the 19,509m2 (210,000 sq ft) shopping centre, with 9,290m2 (100,000 sq ft) of leisure, in 1991. By then, the UK recession was in full swing, and the upmarket independent shops, that should have been the lifeblood of the development, either barely made a profit or closed down.
Nevertheless, some deals to national multiples were struck on 25-year leases at zone A rents of about £1,076 per m2 (£100 per sq ft). But this was not enough to meet the £160m development costs of the centre. Mounting voids helped to push the Galleria into receivership in 1993, when it was bought by Swedish fund Lansfastigheter for £10.5m.
The centre was in the news again this summer when Slough Estates won its court case against Welwyn Hatfield district council. Slough was awarded £48m in damages after it emerged that the local authority had secretly relaxed the tenant mix agreement at the Galleria with Carroll Group.
Theoretically, this allowed the Galleria to compete with The Howard Centre in nearby Welwyn Garden City, which Slough developed at the same time. Although Slough claims that it would not have built The Howard Centre if it had known of the relaxation, the centre has proved much more successful than its Hatfield competitor.
With The Howard Centre trading successfully, Lansfastigheter’s UK representative, Waxy Management, reconsidered the Galleria’s position and decided 12 months ago to rebrand the centre as a factory outlet.
The arrival of designer-label discounter T K Maxx a year earlier may have helped the centre to change direction – the retailer now anchors the front of the centre in 2,880m2 (31,000 sq ft).
Michael Fitton, centre manager and a former retail operations manager with Villeroy & Boch, explains the current strategy: “The only lettings we’re making are to outlet retailers.” So potential tenants such as an Athena franchise and the National Lottery were politely turned away. “That would be confusing the message,” asserts Martin Crossley, partner at DTZ, joint letting agent with Brian Oakwell & Co.
The names of retailers in the centre, such as The Baggage Factory, which sells seconds from Next and Selfridges, may not be familiar to many shoppers. But Crossley says: “It doesn’t really matter who the retailers are – it’s the branded goods they’re selling that are important.”
Fitton agrees, and he has harsh words for those centres that do take in branded retailers: “They’re not really factory outlets, they’re High Street retailers. The Galleria is probably a truer factory outlet.”
Operators of other outlet centres see things differently. Chris Pleeth, retail property director of C&J Clark Properties, which pioneered the UK factory outlet concept at Street in Somerset, says: “There is a lot of misunderstanding about factory outlets. There is no one generic concept.”
Both he and Scott Malkin, chairman of Value Retail which operates Bicester Village factory outlet centre, near Oxford, point out that while their centres could be planned from scratch, the Galleria has not had the same advantage. Says Malkin: “They are taking whatever attributes they had and are trying to define the product around that. The Galleria could turn out to be a discount centre with outlet tenants.” Pleeth adds: “I’ve always believed it’s very difficult for a failed retail scheme to be . . . converted to a new concept.”
The Galleria’s letting agents are very well aware of the negative press that the centre has inherited. “We have to change this perception of the centre as a ‘white elephant’,” says Brian Oakwell.
Crossley thinks that they are making progress. The occupancy rate is slowly rising, and two leisure units, totalling 929m2 (10,000 sq ft), are planned in the void beneath the cinema. Some 15 units – totalling 3,902m2 (42,000 sq ft) – are available, and Crossley believes that three of these will be let by Christmas.
“We’re not doing deals just to get income. . . We can take our time and do deals with the right people,” adds Crossley. Analysis of these deals is difficult as the landlord is signing only short-term leases, combining base rents with a turnover rent related to the retailer’s business plan.
“We’re going through an evolutionary process,” explains Peter Everest, director at Waxy. “I would envisage doing longer leases in two to three years’ time when we’ve established what the right market level is.” And he refuses to be drawn on whether Lansfastigheter plans to sell the centre. “We have a medium-term investment strategy,” is all that he will say.
While the battle to win retailers’ confidence has been partly won, the centre still faces an ambivalent public. A recent media campaign saw high-quality adverts printed in national newspapers such as The Mail on Sunday. And Fitton is about to launch an in-house glossy magazine that will be mailed to the centre’s target customers. “But it won’t have five pages of discount vouchers,” he says. “There’s discount here every day.”
For the same reason, Fitton claims that the Galleria has no plans for a privilege card. This is surprising, given that Fitton’s top priority is to retain the loyalty of his existing visitors. However, he has little time for lapsed customers: “I’m not greatly interested in targeting them. There’s little point in arguing the concept with someone who’s slagging it off.”
So it looks like our cinema-going taxi driver will be shopping at Hatfield market for some time to come.
GALLERIA FALL AND RISE
1987:Carroll Group and Welwyn Hatfield district council agree plans for a mixed-use shopping and leisure centre at Hatfield above the A1(M).
1991:The Galleria opens. The leisure element is a success, but the centre has many voids.
1993:Lansfastigheter purchases the centre from the official receiver for £10.5m.
1994:T K Maxx takes a store and later expands to 288m2 (31,000 sq ft).
1995:Lansfastigheter relaunches the centre as The Galleria Outlet Centre.
1996:Lansfastigheter plans a further 929m2 (10,000 sq ft) of leisure space beneath UCI cinema.
