Peter Rees, chief planning officer for the Corporation of London, is a man who knows what he wants for his Square Mile emporium. A decade ago, he broadcast his desire in the property press for Marks & Spencer to open in the City. And eventually, in 1994, it answered his call.
M&S now has seven sites in five of the City’s prime areas. One of the stores, on Liverpool Street, has been so successful that it was extended last year, just two years after opening. Not surprisingly, Rees is proud of his achievement. Now he has decided to go upmarket, and has put the call out to Harvey Nichols.
Rees believes the doyenne of upmarket department stores is exactly the type of retailer the cash-rich City needs. “There isn’t the range of shops for the amount of money that is here. I was surprised that most of the retail coming into the City was run-of-the-mill. I’m not saying that we don’t need this type of retailer, we do. But there’s a high concentration of higher income earners here. I would have thought that a company like Harvey Nichols would realise that opening in the City would be beneficial.”
He says there is also scope for a Burlington Arcade-type development, along with retailers catering for hi-tech gadgets, or “toys for boys,” as Rees puts it.
Unfortunately, Harvey Nicks is not yet answering the call. In response to Rees’s plea, a spokesman stated dryly that Harvey Nichols “is always looking at new sites, but we have no plans, as yet, to open any stores.”
Rees is correct about having a large percentage of high earners in the City. But there are many reasons why Harvey Nichols would delay opening a store there. The area lacks large floorplates and developments (see panel), and retailers face the problem of operating in small, crowded streets which make deliveries difficult. The most talked about problem, however, is the area’s unusual trading environment.
According to Ray Dowse of Cushman & Wakefield Healey & Baker, most retailers have problems coming to terms with five-day trading, which sees a large percentage of the business done either early in the morning or at lunch time. In addition is the “Royal Exchange syndrome”, a reference to the upmarket retail scheme that has been battling rumours of unsuccessful trading ever since opening two years ago.
Not high earners
Everyone, from Rees to developers and agents, agrees that the City, where around 250,000 people work, is undersupplied in terms of retail. What is not agreed is Rees’s claim that there is the need for more luxury retailers. Some believe what is needed to cater for the 80% of workers who are not high earners is more run-of-the-mill high street brands.
“One always reads statistics about the high spending power of City workers, but the reality is that the higher earners actually have trouble finding the time to spend their wealth, at least during the week,” says Mark Painter of DTZ. He points out that the principal driver of the City retail economy is mid-range multiples and convenience retailers. He says: “This is witnessed by the scramble for space among the grocery and convenience operators over the past few years.”
Dowse, who is searching for sites for Phones 4U and ski wear firm Fat Face, says that not many luxury tenants are looking for space in the City. “Those tenants are not in the market at the moment. The only place in the City that has the reputation for high-quality retailers is Royal Exchange.”
Michael Punkett, associate with the scheme’s architect, Fitzroy Robinson, admits it had a “shaky” two-year start. “The building was meant to have a restaurant in place when it first opened. Terence Conran’s Corney & Barrow restaurant appeared much later. But now the restaurant is there, it definitely has had a positive impact on trade.”
Sceptics are prepared to admit that the addition of the restaurant has lifted the scheme’s profile and added to its draw. Just two weeks ago, several signings were announced at Royal Exchange, including sushi bar Noto and diamond specialist/designer jeweller Wint & Kidd.
Punkett agrees that the scheme needed varied attractions. “The key to a successful scheme is to keep developments as mixed as possible. At Royal Exchange, we have Tiffany’s at one end and Benjys at the other. It would have been easy to fill it with jewellery stores, but we didn’t.”
In other words, the City, like any other retail centre, needs a mixture of operators to satisfy all needs. Even so, landlords still hanker after the glamorous. “MEPC wanted high-profile tenants for its, Paternoster Square development,” says Dowse.
In fact, facing a lack of requirement from upmarket retailers, MEPC has signed up well known high street names for Paternoster, such as Boots and Starbucks. Signings of Monsoon and Specsavers are said to be imminent.
Landlords’ and developers’ desire for luxury tenants is understandable. “Generally we are led by what the office agents say,” says Rupert Cooper of Jones Lang LaSalle. He explains that, if a ground-floor retail unit is let to, for example, a music shop or a restaurant, it could be difficult to let the office floors above. “It’s easier to let the office part first than it is to let the retail element first,” Cooper adds.
Biggest landlords
John Weston Smith, a director with British Land, one of the biggest landlords in the City with some 260,000 sq ft, says that it tries to let retail units to the retailer that people working in the area say they want. “It’s a question of getting in the type of retailer that people are really looking for, be it a restaurant, coffee shop or wine bar. It’s not for us to tell people what the demand is.”
Rees’s aim for more upmarket retailers could happen eventually. At the moment, however, landlords will sign up retailers that are willing to take a chance on a City location.
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With the City dominated by offices free-standing purpose-built retail units are rare. As a result retailers rely on office developments to provide units. And there lies a dilemma. There has been a lack of development owing to the economic downturn so few retail units have become available. The area’s retail provision falls into three broad areas: Cheapside and Fenchurch Street with Paternoster Square acting as an extension; Leaden-Hall Street; and Broadgate and Liverpool Street plus a slice of Moorgate. As Ray Dowse of Cushman & Wakefield Healey & Baker says: “Retail demand continues to outstrip supply despite falling confidence in the office employment sector. Few units in prime locations became available in 2003 and as such there was a shortage of new transactions. 2004 should be no different but retailers will continue to be cautious and selective.” |
