by Peter Fineman
The activities and aspirations of the established companies in the retail warehouse field are now well known. For new locations, and for resites from first- or second-generation stores, there is still a strong level of demand across a wide user spectrum. The relative simplicity of building type, coupled with single-level parking and more straightforward access than in town-centre locations, has inevitably appealed to an increasingly car-borne nation.
Newcomers
The original concept of retail warehousing has seen significant change during its short evolution. Increasing attention is now focusing on newcomers to the market, who are extending the range of goods considered appropriate for sale in decentralised locations.
Some of these newcomers are largely repeating their traditional High Street operations in out-of-town locations, albeit in a different manner. Users falling within this category include footwear, car accessories, fast food and even opticians. Other users, most notably Boots, are specialising on one of their product areas in particular. Many of these new activities are in their infancy, so as yet it has been difficult to fully determine the degree to which they will successfully cohabit with town centres. Halfords, for instance, trade in and out of town, albeit with different trading themes. Habitat, too, regard their activities in and out of the High Street within the same catchment area as complementary to each other.
The High Street doyennes, Marks & Spencer and John Lewis, have yet to display their new out-of-town concepts and one can only guess at the extent to which these could compete with their own town-centre operations. Other companies such as Ward White and Woolworth own a diverse range of retail chains, some trading in town and some out of town.
It is interesting that both these companies have an extensive involvement in the toy trade, where bets seem to be on as to whether the in-town or the out-of-town location will be most successful. Woolworth seem firmly committed to expanding trade in their town-centre stores. Queensway, too, are concentrating their newly-acquired Hamley’s activities firmly in the town centre. At the other end of the scale, Ward White, who presumably purchased Zodiac Toys for its strong High Street representation, are now also considering out-of-town locations. Toys R Us trade both in and out of town and while their concept clearly relates more closely to the latter, they tend to have a preference for the edge-of-town shopping centre.
Many of the foodstore operators are also placing increasing emphasis upon toys. It is evident that this market is growing and one wonders how much money would be left to be spent in other stores once all these toy shops have been visited!
Location
There is often a presumption by some developers that the better the road network the better the site. In general this will apply, but motorway junctions are not always suitable for retail warehouse developments if they are too far removed from densely populated areas. On the other hand, a site that is both close to a motorway intersection and a major concentration of population has the best of both worlds. A notable example is Ashford Retail Park, where Edward Erdman are letting and funding agents for some 160,000 sq ft at junction 10 of the m2.
It is likely that only the more substantial schemes will be sufficient in such locations, although this must be viewed against the background that schemes over 250,000 sq ft are now liable to be called in by the Secretary of State for the Environment.
Because of the strong level of demand, care needs to be taken in analysing total space requirement and the extent of potential overlap between markets. It is not unusual for the High Street retailer, embarking on a new expansion campaign, to aim for a number of stores within a very short period – almost, it sometimes seems, at any cost. At times, there appears to be an element of this same attitude in the retail warehouse market.
It will therefore be critical for the market players to judge the extent to which those in the same user band can successfully operate adjoining each other. The DIY companies have already demonstrated that this is possible to a considerable degree; so far it has been more difficult to reach a conclusion in regard to furniture and other users.
Unlike town centres, whose location is identifiable, conflict between out-of-town sites in the same area is more difficult to analyse.
Planning policies, which vary from district to district, have dictated that some areas have less representation than others. Greater London is perhaps the best example and certainly in this area the danger outlined above is perhaps less acute. Nevertheless, it is becoming clear that a number of proposed schemes rely on the same pool of expenditure.
In general, the retailer is being offered a widening range of schemes from which to choose. Timing of these developments could be critical to their involvement. In areas of trade overlap, for instance, two schemes from retailers of the same ilk can sometimes survive where the weaker location has established itself first. But, if a large scheme is unduly delayed, there is a danger that trade in the meantime could be lost among smaller developments in the same catchment area. Certainly retailers and investors will need to be cautious in their assessment of comparative trading locations, with the possibility of saturation in some areas.
A successful developer needs to understand a user’s needs. This includes both unit size and affordable rent (and perhaps the extent to which each user would be sensitive to competing facilities elsewhere). Thus, different users can produce a different range of rents, which may influence the rate of growth in certain instances.
Notwithstanding the heavy increase both in rental and site value in the London area, it is interesting to observe here (and indeed in certain other prosperous areas) that higher site values are sometimes generated by residential rather than by retail development. In certain cases this has made the retailers job in finding sites in these areas increasingly difficult.
Planning
The planners’ role in the market has been, and is, vital. Planning restrictions and limited land availability (particularly in the London area) have tended to ensure limited supply, against a background of increasing demand with the inevitable result of higher rental values. However, there is growing evidence that in some cases planning consents are more easily achievable now that many local authorities recognise the inevitability of retail warehousing – at least in the core trades. Increasingly, it has become accepted that people will travel to a neighbouring area to shop at a retail warehouse rather than necessarily travel to their traditional shopping centre.
According to a recent URPI report, in general the impact of out-of-town stores on the town-centre retailers will be relevant only where the range of shopping facilities is affected. Similarly, where there are no competing facilities in the town centre or where personal expenditure is growing rapidly, the presumption again is that consent may be more readily obtainable. For example, IKEA are hoping that a more relaxed attitude will assist in their UK expansion plans: the fact that they achieved their recent planning consent at Neasden by negotiation is an encouraging fillip to their ambitions for the UK.
If the trend towards easier consents continues, one can foresee a number of factors arising. The gap between premiums for land with consent as against that without could reduce, although this may not necessarily be an adverse reaction. There has been a tendency for developers to concentrate on locations where planning consents may be more easily forthcoming rather than looking at the straightforward commercial suitability of sites. The obvious danger, not only for the retailer but also for the fund investing in such locations, is in opting for a scheme which could subsequently suffer if a better site nearby is found in an improved location with planning consent.
Design
There is a current trend of thought toward providing a more sophisticated architectural design to out-of-town developments. It is fair to say that high standards of design are required by the funds and planners – perhaps to a greater degree than the retailers, and rightly so. However, if trading and investment potential are not to be prejudiced the design and layout of stores must not be allowed to take undue precedence over commercial viability, purely for the sake of sophistication and aesthetics.
The future
There is a growing tendency for local authorities to earmark a site within their area (and often also their ownership) for a retail warehouse park. This will often tend to be closer to the town centre than those proposals which are the subject of undesirable applications. While this positive response is to be welcomed and encouraged, local authorities must have regard to market forces as well as planning considerations, as too often the selected site is commercially unsound.
With proper intervention by local authorities (and if user type, size and location is properly controlled) there should be no real threat to town centres from retail warehouse parks. Thus, the increasing lobby of support for the protection and preservation of the town centre should be able to achieve its aim in harmony with the expansion of out-of-town facilities.
