Bargate: remember the name because it is unique within the UK retail world. Bargate Shopping Centre in Southampton is the only shopping centre in the UK to have closed in the last recession.
Out of the 640 centres in the UK this is quite a feat. Obviously some centres have been teetering on the edge of closure, while others beg the question: “How on earth do they survive?” But survive they have – even if it has meant populating them with the most “value” of retailers.
Meanwhile, the picture is very different across the pond. The US, which has about 109,500 shopping centres ranging in size from small convenience centres to the large super-regional malls, has seen a proliferation of closures (see panel).
Here, a cross-section of the retail sector give their verdict of how the UK’s centres have survived. Plus, Capital & Regional executive director Mark Bourgeois talks about the refurbishment of the 260,000 sq ft The Mall in Walthamstow.
The ‘dead mall’ phenomenon
The term “dead mall” is commonly understood in the US, there’s even a ghoulish website dedicated to the phenomenon (www.deadmalls.com), write Mark Robinson, investment director, Ellandi, and Jo Footitt, real estate partner at Irwin Mitchell.
These are malls with such a high vacancy rate or low consumer traffic level that they are allowed to die – and then either stand derelict or are demolished to make way for more profitable developments.
The demise of the shopping mall in the US is blamed on changing shopping habits and the recession. The UK has faced similar issues and yet our shopping centres, even those deemed to be secondary, are in most cases through the worst, and many are starting to thrive.
Despite speculation that we would have similar schemes blighting towns and cities across the UK, there is only one scheme to have shut up shop in this recession: Southampton’s Bargate.
Bargate was the sickly child that struggled for an identity within Southampton’s shopping hierarchy and it was unable to fight off the worst retail recession in 20 years.
But its symptoms were not unique – many other schemes have a poor layout, high service charges, no effective anchor or a large, regionally dominant scheme close by. So why has Bargate been the UK’s sole casualty to date?
Clearly there many differences between the UK and the US. But in this context there are two key factors – land and philosophy. The wide open spaces of the US prairies mean that residual land values are very low, there is no green belt, nimbys, fiendish land assemblies or compulsory purchase orders. As a result, new schemes can be built and opened in a fraction of the average of 15 years it takes to bring a scheme to fruition in the UK.
Being able to throw up new meccas to consumerism means that the US market is prepared to let things fail so they can get on with the new, shinier future.
In the UK, most shopping centres are located in town centres, as opposed to being on the edge of or even out of towns. They are located in the heart of the communities in which we live, work and play, meaning there are reasons sometimes beyond the economic, as to why they cannot be allowed to fail and indeed why they will always have a role.
Look at the role local authorities have played in tending our sick shopping centres. Perhaps as a result of reconstructing (not always successfully) our bomb shattered town centres after World War II, local politicians are comfortable taking a role in driving regeneration.
Lenders also have their role to play in keeping death from the door of the struggling centre. Unlike in the US, lenders tend not to walk away from centres that are in financial trouble.
If the borrower goes under the lender has various options to intervene to protect the loan secured against the asset.
There is of course an argument that in keeping these old centres alive the opportunity to carry out much-needed redevelopment to bring many of the near-obsolete shopping locations up to an acceptable modern standard has been missed.
Perhaps we have been looking in the wrong place for dead malls in the UK. With the seismic shift in grocery shopping patterns, the long-term health of some out of town shopping centres and precincts based around large supermarkets may be less rosy.
Some analysts have estimated that up to 20% of these large format food stores might be surplus to requirements. With only one tenant to deal with (who may be only too willing to walk away from its rental liabilities) the obstacle of the Landlord and Tenant Act 1954 could be overcome by developers.
Legal protection
The reality is that it is actually very difficult to allow a shopping centre to die in the UK, write Mark Robinson, investment director, Ellandi, and Jo Footitt, real estate partner at Irwin Mitchell.
One barrier is the protection afforded to tenants by landlord and tenant legislation: Owners and lenders cannot simply close down the centre and sell the site to a housebuilder or shopping centre developer.
That new owner would assume responsibility for the leases and would need to go through a complex and costly statutory process to secure vacant possession or dig deep to buy the tenants out of their right to occupy. In the event of wholesale legislative change (the Department of Justice is reviewing the efficacy and relevance of this 60-year-old legislation) we could see the life support system switched off for some terminally ill shopping centres
Dead superstores, even brand-new shiny ones, such as the intended Tesco in Chatteris, Cambridgeshire, can already be found across the UK and the numbers are likely to increase over the coming years. A purely retail destination robbed of its anchor and without the complementary community uses found in town centres, has a bleak prognosis. Who will be fighting to save them? Politicians will not have the social imperative to ensure their success.
Indeed, the pressure to provide new housing and high land values in the UK mean that, unlike in the US, any failed retail parks will not remain that way for long.
Apologies to the morbid among you, but there is little chance of anyone setting up a memorial website to these “dead malls” in the UK.
Case study: The rebirth of The Mall, Walthamstow
Refurbishments have been a key driver for many centres surviving and beating the recession. Capital & Regional is one company investing in its ageing centres – to the tune of £65m spread across several developments.
One of these, The Mall in Walthamstow, E17, is more than 25 years old. Starting in July 2014 and finished in May this year, £3m was spent to update the flooring and brickwork, enhance lighting and improve connectivity through the addition of a new staircase.
Another element of the refurbishment was including Walthamstow’s history, with four key local figures honoured with panels describing their achievements: film director Sir Alfred Hitchcock, textile designer William Morris, photographer David Bailey, and aircraft designer Sir George Edwards.
“Walthamstow has its own distinct and very local and loyal catchment,” says Mark Bourgeois, executive director at Capital & Regional, “and what we noticed and certainly saw in Walthamstow was customers’ perceptions of their shopping centre. They’d been to Westfield Statford and suddenly, [The Mall] didn’t look as nice…”
The huge Australian-developed mega centre is just six minutes in a taxi, or 27 minutes by train from Walthamstow Central.
“Walthamstow is a fantastic example where we have taken the scheme, introduced new retailers, and undertaken a refurbishment. And it’s a really interesting refurbishment. We’ve got a really strong design element.”
Bourgeois adds: “The recession meant that quite a few shopping centres, and ours included in places, didn’t receive the investments that they would have done had cash been more freely available. That’s always a constraint during a recession but, inevitably you need to be competitive and make sure your offer is absolutely there.”
Next on the refurbishment list for the company is The Mall, Maidstone and The Mall, Camberley.
What the market says
Edward Cooke, director of policy and public affairs, British Council for Shopping Centres
The shift away from a very high proportion of traditional retail units in centres is both a reaction to economic conditions and also structural change driven by the way technology has disrupted markets. New leasing strategies, occupier incentives, improving customer engagement and better consumer data are introducing interesting and relevant occupiers to schemes. They are driving custom to stores and footfall to town centres, proving stores are a fundamental part of an omnichannel retail operation.
Nick Symons, partner, MMX Retail
Successful shopping centres had to show significant flexibility and act swiftly to deal with the rapidly changing market conditions during the recession.
One measure witnessed during that period was to rebase core rents, securing the survival of a number of shopping centres. Proactive landlords were quick to accept pre-recession market rents had become unsustainable and it was better to rebase rents and maintain occupancy than to face empty units and a loss of vibrancy at their centres.
The change in the rent model at this time also made schemes more affordable for food and beverage operators as the tenant mix at centres became even more crucial.
Critically, it was landlords’ ability to adapt relatively quickly, combined with their ability to sustain an appealing mix of retailers and leisure offer which enabled shopping centres to survive the downturn. The schemes which were unable to react during this period continue to witness the after effects of their stagnation, with many struggling to regain their position in the UK retail hierarchy.
Helen McVie, retail asset manager at Delancey on behalf of Metro Shopping Fund (Delancey and Land Securities retail jv)
Metro Shopping Fund acquired Southside, SW18, back in 2005, three years before the recession hit. At the time, Southside was an internal-facing scheme with a retail line-up that did not reflect its consumer demographics – over 69% ABC1. Because of this, and with Wandsworth’s great connectivity to central London, we saw a real opportunity to create a new destination for south west London.
Yet in order to deliver this we had to dramatically improve the retail offer. We needed to create new street-facing frontage with units with enough space to meet modern retailer needs.
Even when the recession hit in 2008, we remained committed to delivering this ambition. We scaled back our development plans and planning permission was granted in February 2011. An 82,000 sq ft Debenhams will be the final piece of the development when it opens in autumn, alongside eight further units.
Paul Rich, centre manager at Cwmbran Shopping
Welsh retail has undeniably experienced the harsh reality of the recession. Cwmbran Shopping, however, is an example of how survival and success are possible even when the odds don’t appear to be in your favour.
To make sure the scheme continues to thrive, we have focused on developing targeted marketing initiatives to
promote the centre as the heart of the community and engage with family shoppers.
It is not only an outdoor shopping centre, but the focal point for the Welsh new town and so we understand the scheme must remain as accessible as possible for the whole community. This has been achieved by continuing to offer free parking, whereas shoppers in nearby Newport and Cardiff have to pay to park.
James Cons, managing director, Leslie Jones architecture
A creative approach will alter perceptions of poorly performing local shopping destinations and is in my view critical to shopping centre survival, and indeed regeneration. However, landlords of
both primary and secondary schemes from across the UK have experienced mixed successes when introducing
new offers.
Cinemas and revitalised food offers continue to elevate night-time economies and improve dwell times, but further diversification must be capable of adding a point of difference. The problem lies in defining the alternatives that will achieve this.
From Crazy Golf to conference spaces, these are in fact failing to inspire those consumers who don’t normally spend their free time at shopping centres. A more curated approach might be the solution, where leisure uses are aggregated, bringing a number of action sports into one space. Surfing, skiing and skydiving activities can be supported with associated retail and dining. Events can be based around these uses – with climbing, gyms and trampolining also a draw. Landlords must look to inspire their customers if they are to be successful in expanding visitor numbers.”
noella.pio.kivlehan@estatesgazette.com
