Some thought it would never happen. Others questioned whether the difficult economic conditions would delay the deal. So confirmation that John Lewis has agreed to anchor the £600m redevelopment of New Street station is a sweet victory for Birmingham.
The news has been a long time coming. Britain’s favourite department store has flirted with the UK’s second city for a number of years, but failed to commit, leaving Birmingham with the dubious distinction of being the only top-six destination in specialist research consultant CACI’s Retail Footprint Ranking 2010 without a John Lewis department store.
Plans for the £100m, 250,000 sq ft purpose-built “glass doughnut”, as it is dubbed locally, at New Street station’s Pallasades shopping centre were first revealed by Estates Gazette last summer, but the deal was confirmed only in March this year.
Andy Street, managing director at John Lewis, says: “Birmingham is the best retail destination outside of London. Having a John Lewis store in the city centre is almost its last retail building block, and it will connect all of the retail circuit, including the Bullring.”
Jeremy Collins, head of retail development at John Lewis, says footfall and location of the scheme were major draws. He adds: “It was our number one critical objective to be in the heart of the city centre, and it’s fair to say that the Bullring shifted the weight of retail to that part of the city when it opened in 2003. New Street station has remained strong, but it will now be re-established and will form a natural circuit with the Bullring.”
The existing 200,000 sq ft retail offer at Pallasades is undoubtedly poor, and has under-performed relative to its market potential, given the very high footfall generated by the station. The council and its Birmingham Gateway partners have had to radically rethink its layout and the whole retail mix.
Around 20 shops and 10 kiosks that sit in the middle of the scheme are being removed to make way for a glass atrium over the enlarged concourse of the station.
Better environment
William Nelson, associate director at Jones Lang LaSalle, says: “We’re probably looking at losing 50,000 sq ft of retail when the scheme is redeveloped, but it will be a much better shopping environment.”
Although this space will be lost from the centre of the scheme, John Lewis’s full line department store – which will sit on Stephenson Street – will have access into the shopping centre and the concourse over five levels, and will effectively more than double the size of the centre.
Collins says that there may be John Lewis Partnership spin-offs in the Pallasades, such as a café and possibly a Waitrose. And he notes: “It is interesting that a number of upper-end retailers, such as Whistles and Jigsaw, aren’t represented here at the moment. These sorts of tenants could sit next to us. There’s a great opportunity to strengthen the mid to upper fashion end in the city, and I’m sure homewares will feature, too.”
Peter Jones, director of property at Birmingham council, agrees: “We want to reposition the centre for retailers to trade happily alongside John Lewis – retailers who want to make a debut in the city, for example. We want to be seamless in quality with the Bullring.”
How that will work in practice remains to be seen. Publicly, at least, Bullring owner Birmingham Alliance and John Lewis maintain that their respective schemes are complementary and not in competition with each other. Robin Dobson, head of retail development at Hammerson, says: “We are not disappointed we didn’t get John Lewis at one of our schemes. We are very excited about it going to the Pallasades as it will have a hugely positive effect on Birmingham.”
Behind the scenes, however, the Birmingham Alliance – a partnership between Hammerson, Henderson Global Investors and Future Fund – must surely be disappointed that John Lewis walked away from discussions that might have seen it anchor the long-awaited 2.9m sq ft Martineau Galleries development. However, according to Dobson, losing John Lewis as the anchor does not change the opportunity for Martineau Galleries, but plans will now take a different direction.
He says: “We have a flexible consent already in place. Martineau Galleries is a very important gateway site for the proposed HS2 terminus at Eastside.
This gives us the flexibility to refresh and renew the mix of uses. We are working up a new masterplan for the site this year.”
At the same time, Birmingham Alliance is also working closely with Birmingham council on bringing forward a cohesive masterplan for the 21-acre Wholesale Markets area – which sits next to the Bullring and is a natural extension to the scheme – and was once also believed to be a contender for the John Lewis store.
Dobson explains: “We are not appointed as the preferred developer, but the Bullring plays such an important part of regeneration to that land at the south of the scheme that it is inevitable that regeneration will start at the Bullring.”
The first phase of regeneration in this area is at Spiceal Street, where the Alliance is to extend the restaurant and leisure offer of the Bullring by 20,000 sq ft, comprising three units.
Retail dynamics
While renewed activity around the Bullring and redevelopment of the Pallasades is likely to significantly benefit those particular pitches, the future for connecting retail areas is less certain.
Steve Halsall, partner at CACI, believes the redeveloped Pallasades will change the retail dynamics of Birmingham.
“The retail centre of gravity will shift from the Bullring towards the Pallasades,” he says. “New Street will continue to be heavily footfalled and be the key link for the transfer of shoppers between the Bullring and Pallasades.
“Corporation Street still needs to find a new role within Birmingham city centre, and tenants there, including House of Fraser, will have to work even harder to counter the impact of the Bullring and the Pallasades. The Pavillions centre has suffered, and the redeveloped Pallasades will only compound the reduction in footfall in this centre.”
On balance, though, John Lewis’s arrival in Birmingham city centre and the potential for redevelopment at Martineau Galleries are likely to significantly improve Birmingham’s position on the UK retail rankings ladder.
CACI’s Halsall says: “The combined development of Martineau Galleries and a revitalised Pallasades means that Birmingham has an opportunity to recapture the number two spot from Glasgow in CACI’s Retail Footprint Ranking for the UK. Birmingham city centre is predicted to see a 7.6% increase in market potential as a result of these two schemes opening in 2014.”
What next for the Mailbox?
Just 1,000 ft from the new entrances to New Street Station and the new John Lewis department store, the Mailbox will be a major beneficiary of the regeneration of New Street and the Southside area, which will reorientate the station and its associated footfall towards the scheme.
Following the successful sale of the 1.5m sq ft mixed-use Mailbox in April by Birmingham Development Company to Brockton Capital for £127.1m, the new owners – along with minority stakeholder John Milligan of Milligan Retail – are now working up plans to improve the tenant mix on the 4.8-acre city centre estate.
Until now, the Mailbox has not performed as well as its previous owners would have hoped, due mostly to its location on the outside of Birmingham’s main retail circuit rather than any problems with its tenant line-up.
Although home to luxury, top-end retailers, including Harvey Nichols, Emporio Armani and Thomas Pink, the scheme has a number of long-term empty shops.
The estate comprises 640,900 sq ft of lettable space, including office, retail and restaurant units, two hotels, 144 flats and a 686-space public car park.
Brockton, via its £500m Brockton Capital Fund II, plans to open up the offer for residents in and around the scheme to include a cinema and a supermarket.
David Zimmerman, a partner of Brockton Capital, says: “We have earmarked more than £10m of funds to spend on this asset. We are doing a lot of consumer and local demographic research to define our strategy, which we hope to launch later this year. We want to bring in new tenants to the city that possibly aren’t here already. Watch this space – we are planning something really exciting.”
Upmarket independent food retailer Wholesale Foods was said to have been in talks with BDC prior to the sale for a store within the scheme. The retailer has yet to reveal whether it is still interested in taking space at the development.
