The long-awaited £500m Martineau Galleries has cleared the first hurdle. With Birmingham council “minded” to grant outline planning permission, and the government announcing it will not call in the project, the way is free for the Birmingham Alliance to move forward with its grand plans.
The alliance’s latest venture — a 2.9m sq ft mixed-use development — will sit on a 13.5-acre site between Moor Street, Queensway and Corporation Street.
The development has been hailed as the missing piece in Birmingham’s retail jigsaw, and a catalyst for the city’s Eastside regeneration. But with more than 900,000 sq ft of retail within striking distance of the 1.2m sq ft Bullring, will Birmingham’s shoppers be shopped out?
The retail strain is already beginning to show. While the Bullring’s performance is good, and latest figures from the Mailbox show a 15% rise in sales, the same cannot be said for Corporation Street.
Historically part of the city’s prime pitch, the street has seen footfall decrease and some tenants pull out since the Bullring’s opening. It is fast becoming a haven for independent niche retailers — an interesting addition for shoppers, but landlords find the rents distinctly less so.
Where Martineau will pitch itself within this patchwork is still to be decided. Bob de Barr, development director at the Birmingham Alliance, says work is now progressing to finalise section 106 agreements and draw up development contracts — something the alliance hopes to have signed by the end of the year.
When construction does start, de Barr says, the site, with its 2,500-space underground car park, lends itself to one phase.
The scheme will not open its doors until 2011, giving what de Barr calls “some clear water” between it and the Bullring. “By then, it will be eight years since the Bullring opened, and we think that is the right separation and the right timing,” he says.
“Martineau Galleries is not going to be nearly as big as the Bullring in retail terms and, although we have consent for 900,000 sq ft, we will not necessarily build it all. We’ll appraise the market at the time. At the moment, things suggests a bit less.”
As a result, the alliance could substitute some retail for residential or a hotel, for example, says de Barr. “The idea is to complement rather than compete with the Bullring,” he says.
That maybe an obvious answer for the developer of such a large scheme, but the Birmingham Alliance — a joint venture between Hammerson, Henderson Global Investors and Land Securities — is also the brains behind the Bullring, and it is unlikely to want to cannibalise its own asset.
De Barr adds: “We know from our studies that, even with the Bullring, Birmingham is still relatively undersupplied.”
He points to studies that show underprovision of retail for a more affluent section of consumers. As a result, unlike the Bullring, which caters for young fashion, the Martineau Galleries will be a “more mature” offering.
The company hopes this will allow it to achieve the highest rents in Birmingham, which are reported to stand at between £250-£300 per sq ft zone A, in the Bullring.
To achieve this, de Barr says: “The high street needs another anchor.” Within the scheme, there will be provision for one “good-sized” department store and a number of medium-sized shops. A mini anchor could be provided at the other end of the scheme to compliment the existing House of Fraser — one which, although not owned by the alliance, will be “quite useful”. Homeware will be a focus.
Retail analysts believe this is a smart move. Dan Parr, a principal consultant at CACI, says: “There is concern among everyone with a stake in Birmingham about when the city will reach capacity. It doesn’t have room for too much more fashion. Fashion spend is slowing down across the country, and now the smart developers — those that will be successful in Birmingham — are aiming at homewares.”
According to CACI (see graph), homeware is already a booming market, and worth £21m of the city’s £188m total household spend. By comparison, clothing and footwear makes up £14.3m. Spending on homeware in the city is predicted to rise to £27.5m by 2011 — the Martineau’s opening date. Add in recreation and culture, which includes audio/visual, photographic and computing equipment, and that figure rises over the £100m mark — nearly half the total spend by Birmingham’s households.
Local agents also believe it is time to shake up the city’s retail offer. Rents, although healthy after two years below £300 per sq ft, only shifted to £320 per sq ft this month.
“Martineau Galleries needs to move Birmingham’s retailers up a couple of rungs on the quality ladder,” says Andrew Benson, director at local agent Wright Silverwood. “The alliance was previously looking at John Lewis, Allders and Beatties. Now Beatties has been and gone, Allders has gone bust, and John Lewis is in Solihull, so that pretty much exhausts the traditional department stores.”
Guy Webber, head of Jones Lang LaSalle in Birmingham, adds: “Look at what the city is missing at the moment: homeware. For retail, the market is testing at the moment. I don’t see a great levelling off of rents in the prime locations. And the Bullring has seen a number of key lettings, with kids’ clothingespecially strong.”
As for competing with the Bullring, Webber says: “Martineau just isn’t as large. It will have a different tenant mix.”
The Birmingham Alliance is not the only developer to have seen the booming homeware market. The upmarket Mailbox is targeting homeware retailers too. Its owner, the Birmingham Development Company, is moving ahead with its next and final phase — the 500,000 sq ft Cube. Completion is set for spring 2008 — a full three years ahead of Martineau.
BDC has stolen a march on attracting wealthy shoppers, with the latest figures showing the average sale ringing through the Mailbox’s tills is £300.
But what BDC cannot compete on is scale. The Cube will add four restaurants, 110,000 sq ft of offices, a 50-bed boutique hotel and 260 flats to the Mailbox, bringing its total size to 2m sq ft. However, the total number of shops the extension will provide is just 10.
BDC director Alan Chatham prefers the Mailbox’s numbers to speak for its success. “Last year, the Mailbox generated £62m of sales — up from £54m in 2004,” he says. “Sales densities are between £400 and £500 per sq ft, and up to £1,000 per sq ft in some stores. Our business model is based on low volume versus high transaction value.”
That is something the owner of Martineau Galleries is happy not to compete with. Birmingham Alliance’s de Barr adds: “The Mailbox is very upscale. We want to drive decent amounts of footfall as well as a lot of other uses. Martineau Galleries is going to be a new quarter for the city.”
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The West Midlands will not get the UK’s first supercasino, although it might get a regional casino. That was the ruling of the Casino Advisory Panel late last month. Authorities in Birmingham and Coventry are bitterly disappointed. Birmingham council had backed a plan to build a £250m complex at the NEC site in Solihull. “We were astonished,” says Tim Doughty, director at Savills, who advises the NEC. Securing the casino was seen as crucial for the NEC’s future. The exhibition centre says it faces ever-increasing international competition, and that losing the casino bid will cost it £100m a year. The NEC is considering its next step. “We are looking at options to improve the site,” says Doughty. “The casino was a very important part. Once we’ve had a cold look at the proposals, we could still look at a large regional format, but that hasn’t got the cachet of a supercasino. It’s a watered-down proposal.” Birmingham council is outraged that the West Midlands did not feature on the shortlist. Leader of the council Mike Whitby says: “We will be making vigorous representations with our partners through the consultation process, to ensure that the panel corrects its obvious omission.” The CAP’s announcement has reignited the heated debate about whether Birmingham council was right to abandon a city-centre bid — which would have seen a stadium for Birmingham football club built at Saltley — and throw its weight behind the NEC’s proposals. The decision has divided council members and the business community. But agents seem to back the council’s decision. Guy Webber, head of Jones Lang LaSalle’s Birmingham office, is one. “The NEC was absolutely the right choice,” he says. “It has an international airport, a business community, delegates and a hotel culture. The decision was only contentious if you’re Birmingham football club fan.” Birmingham council has vowed to appeal against the decision, so the West Midlands could get a second bite of the casino cherry. |
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Rents jumped in March for the first time in two years |
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Source: CACI |
