Much has been written and requested to tackle the problems of our town centres. But, at last, the UK economy is in good health; retail sales are on the rise and both corporate failures and high street vacancies are down.
The warm glow of optimism has now moved many investors to target UK retail. Both the stack and range of capital is almost reminiscent of 2005/6. The only complaint is lack of stock and movement in pricing. So who am I to add a note of caution?
Let’s face it, after seven years of apparent famine in our town centres it’s about time we ‘feasted’. And as a nation we certainly know how to party (property leading the way here), with our insatiable demand for more venues to eat out, watch films, drink and even bop - perhaps not me.
Leisure is really booming and no self-respecting town centre should be without it.
So the prospect is bright? Well, yes and no.
Without doubt the appetite and need for major change is as big as the development programme post-World War II. Hyperbole? The unanimous industry taskforce reported at the end of last year and the issues and facts surrounding our town centres were well aired. The inescapable facts that even King Canute couldn’t hold back are that we simply have too much retail floor space and retail rents have fallen dramatically. Thanks to the internet though, both facts are structural, not cyclical.
The solutions are less simple, and certainly less quick. Rents will sort themselves out. JLL research shows that more than 50% of all retail leases will expire by 2015/6 (thus that attractive 8% yield might not look so good in two years’ time). The bigger long-term issue is what to do with the surplus of poor - in every sense of the word - unwanted and unattractive space clogging up our towns and stifling improvement.
The taskforce set out several clear recommendations.
The core of them were:
- Apply strong local authority leadership to masterplan what councils want for their towns for the next 50 years.
- Recognise that town centres need to be mixed-use locations where we eat, drink, work, live, park, and also shop.
- Change on a piecemeal basis will neither help nor manage the wider problem. It has to be done on a scale that creates its own critical mass.
- Aggressive use of compulsory purchase orders is needed to deal with multiple ownership. Could Hammerson and Westfield rejuvenate Croydon without compulsory purchase orders - and they own half of the area already.
- Allow local authorities to tap into the infrastructure funds for town centre regeneration, encourage them to use their ‘rainy day reserves’ and be more innovative in the use of long-term prudential borrowing to assist the regeneration process.
- A smaller but more vibrant retail core will provide the basis for a strong recovery.
Hark’s experience of the pickup in tenant demand of re-based rents, and in reconfigured space they want in the reduced core of towns is good news.
We see the opportunity to remodel and create environments that towns want, and others are doing the same. However, the final speed of the recovery and solution is down to the strength of the local authority leadership and drive. Manchester, Liverpool and London are hardly tortoise pace, but when we talk of smaller less well-resourced towns (if we want this recovery) more pressure and help is needed.
Government is listening, and indeed all the ministers we have spoken to have welcomed both the report and recommendations - they are even making some progress on rates. What they have privately flagged is the issue of long-term change versus short-term political timeframes. To make the change the public have to keep demanding change, and with an election looming this is just the place for the property Industry to press the point.
So let’s keep making the point, as the prize is worth attaining: namely successful towns we are proud to work, live and eat - as well as shop in.
Mark Williams is director of Hark Group