Preston’s dreams of establishing itself as the North West’s third city through an ambitious £700m shopping centre-led regeneration scheme finally ended last week.
Four years after agreeing to anchor Lend Lease’s Tithebarn, John Lewis decided to walk from the scheme.
As the core element to the 1.5m sq ft shopping, leisure and housing project which would have seen 32 acres of Preston city centre reshaped and rebuilt, the result was clear for all to see. Without John Lewis there could be no Tithebarn.
Last Thursday, a Preston council spokesman was forced to admit that Lend Lease’s proposal was “no longer financially viable” and would not be going ahead “in its current form”.
“While our aim is still to regenerate the Tithebarn area of the city, we have to be realistic,” says Preston council leader Peter Rankin. “In today’s market conditions, it [the Tithebarn scheme] was certainly not right,”
Dan Labbad, chief executive of Lend Lease’s EMEA business, says that he was not surprised by John Lewis’s decision. “I understand the decision; times are tough.”
Labbad insists that the scheme would have worked in better market conditions, but adds that recovery is taking longer than envisaged. “There are limits on how long people will wait,” he says.
Despite the council’s and Lend Lease’s mutual assurances that they will work together to rethink the city’s regeneration, most observers agree that hopes for a large-scale development in Preston are dead.
The picture is radically different from that of just two years ago when the Tithebarn scheme won planning consent (see timeline above).
Although the scheme had been beset by delays since its inception in 1999, by early 2009 when it received planning consent it had the backing of the original developer, the Duke of Westminster’s Grosvenor, and Australian giant Lend Lease, as well as the support of the local council. With John Lewis, Britain’s favourite retailer, on board to occupy the scheme’s 230,000 sq ft anchor store, Marks & Spencer signed up for a 150,000 sq ft shop and Cineworld entered talks to operate a multi-screen cinema.
So what went wrong?
John Lewis, which has never before pulled out of a major UK scheme, declined to comment to EG but told the council its reasons for withdrawal included public sector redundancies and the recent decision by BAE Systems to axe nearly 1,400 jobs at its nearby Warton and Samlesbury factories.
However, even at the time that Tithebarn received outline planning consent, some openly doubted its viability.
“I thought it was too big, even at the height of the market,” says one senior retail agent.
The beginning of the end came in October 2009 when the recession prompted Grosvenor to walk away, leaving Lend Lease in sole charge. The Australian developer would have to face a lengthy but ultimately successful public inquiry on its own, not to mention the need to source funding for a huge development in a secondary location during a deep downturn.
On Wednesday, John Lewis managing director Andy Street said the retailer could not see a way to make its planned Preston store viable. More important to the development community, however, is the question of whether the same thing could happen again, putting the final nail in the coffin of further shopping-led, UK regeneration schemes.
The retailer, which in 2005 announced ambitious plans to open a new department store each year until 2015, is waiting in the wings to anchor large and delayed schemes in other cities, such as Centros’s Northern Quarter in Portsmouth and Hammerson’s Eastgate Quarters in Leeds and Sevenstone in Sheffield.
A John Lewis spokesman says that the firm continues to work with Hammerson in Leeds and Sheffield, and that it cannot comment on Portsmouth until Centros and the council finalise new plans.
John Lewis has already rethought its expansion plans since the crash, concentrating its efforts on the roll-out of its smaller John Lewis At Home brand, predominantly focussed on the out-of-town market.
In September it reported its worst results since 2009 with pretax profits down by 18% to £90.4m in the first half of this year.
Yet in the same week that it pulled out of Tithebarn, it announced plans for a – admittedly smaller at 100,000 sq ft – department store at Oakgate’s Monks Cross scheme in York.
It has so far kept faith with severely delayed schemes in other locations such as Oxford, where it has long been linked to a redevelopment of the city’s Westgate shopping centre. In 2008, former owners Capital Shopping Centres and LaSalle Investment Management put plans on hold, although new owners the Crown Estate and Land Securities are aiming to revive them.
James Cooksey, head of the Crown Estates’ regional portfolio, insists that John Lewis has not walked away from Oxford: “We are in active discussions with John Lewis with a view to arriving at a scheme that works for us, for them and for the other key stakeholders,” he says.
Sources say that wealthy Oxford, a city with a limited provision of shops, is a fundamentally more viable proposition to John Lewis than a secondary location such as Preston. The Local Data Company’s most recent figures show that Preston’s vacancy rate, at 21%, is far higher than the national average of 14.5%.
So what could be the future for Preston? Will the city ever be able to attract a major development scheme?
Local agent Danny Pinkus, partner with Robert Pinkus & Co, comments that the demise of Tithebarn might actually allow Preston to move on.
“The scheme has long left local landowners in complete limbo, and its collapse will hopefully pave the way for more realistic proposals,” he says.
Lend Lease’s development agreement with the council expires next March, and although the partners had been busy hammering out a new contract before the collapse of the scheme, Lend Lease will have to submit brand new proposals if it wishes to continue as the council’s preferred developer.
Labbad stresses the firm’s strong relationship with the council and says it is “working out what the new scheme looks like”.
In a bid to spark developer interest, council leader Rankin says that local authority assets on the periphery of the Tithebarn site could be offered to the market.
He also suggests that a phased regeneration on a significantly reduced scale is likely, with 2009’s outline planning consent being used as a framework to help developers. Acquisitive public sector pension fund the Greater Manchester Property Venture Fund is in line to buy land for a mixed-use scheme in the city and Rankin argues that other parties can be attracted.
“We will talk to other investors that are interested in coming in, not just Lend Lease,” he says.
One such developer might turn out to be property giant Land Securities.
Last month, it bought the dated St John’s shopping centre, which sits within the Tithebarn site, from Grosvenor for £5.4m. LandSec is understood to be considering the possibility of working up plans for the site.
But, despite LandSec’s well-known relationship with John Lewis, few expect the retailer to return to Preston any time soon.
Timeline
2009 The project receives outline planning consent from Preston council, but the government calls Tithebarn in for public inquiry, with neighbouring councils including Blackpool and Blackburn objecting to it. By the end of the year, Grosvenor has pulled out, citing a restructuring and a decision to no longer concentrate on long-term city centre regeneration schemes.
2005 Grosvenor signs a contract as Preston council’s development partner. Neighbouring Blackpool and Blackburn launch objections to Tithebarn following an updated planning statement by Preston. The councils argue that the scheme will impinge on their catchment areas.
2007 John Lewis agrees to anchor a 230,000 sq ft department store at Tithebarn. Later in the year, Lend Lease announces a 50:50 joint venture with Grosvenor.
2002 Grosvenor unveils plans, designed by Sir Terry Farrell & Partners, for up to 500,000 sq ft of retail space, plus leisure and a new bus station in central Preston.
2004 The Mall fund buys the 270,000 sq ft St George’s Shopping Centre, adjacent to the Tithebarn site, from Legal & General for £102.5m. Grosvenor is understood to have made a bid.
2006 A year after signing a contract with Preston council, Grosvenor has failed to show progress on the project, with no retail anchor or financial backing secured. “Progress is slow, but it is being made,” said a Grosvenor spokesman. Completion is pushed back to 2013, five years after originally envisaged.
2010 Tithebarn is approved by communities secretary Eric Pickles following a lengthy planning inquiry.
1999 Grosvenor proposes the Tithebarn shopping, leisure and residential scheme for Preston.
2008 Grosvenor and Lend Lease sign Marks & Spencer to be the second anchor in a 150,000 sq ft store. The partners submit a planning application for the 1.5m sq ft scheme, covering 32 acres.
2011 John Lewis announces that it has “withdrawn from discussions with Lend Lease on the Tithebarn development.” Preston council says that Tithebarn is no longer financially viable and the scheme will not now be going ahead in its current form.
