The plight of the shopping centre in the UK is worrying… very worrying. Today, many if not all of our existing shopping centres simply would not be built. There is turmoil in this silo of the real estate market as net asset values, which equity capital markets have not believed for years, hence the discounts, fall with corresponding implications for owners.
So we see financial distress – for example in the case of intu – and more often than not now, long-standing institutional investors running for the hills. The writing has been on the wall for many shopping centres for years. This has led to problem-compounding strategies to sweat buildings, cash conserve and under-invest. It is not unreasonable, therefore, to assert that shopping centres in Britain face an existential crisis.
The challenge is multi-dimensional. British consumer behaviour is changing, with shifts away from goods to services and from stores to online. The fusion of wellbeing and sustainability, which came to the fore in 2019, means less volume.
Competition from other formats also poses challenges for in-town shopping centres. Most notable is the retail park, where accessibility by car is usually easier and cheaper for shoppers. However, it is also worth pointing out how the smaller store, particularly in the food arena, has outperformed the large superstore and hypermarket over the past decade, compounding matters for town centre assets.
Cash-strapped, often chronically so, local authorities have also demonstrably compounded the plight of the shopping centre through exorbitant rates, high car-parking charges and often well-meaning traffic and people-movement strategies that frankly deflect folks from town centres.
The tale of woe most seriously emerges with the shopkeeper who cannot afford to sustain their store estate. So the plethora of business failures, CVAs and the like, which feed the voids, will lead to more charity shops and ultimately a decline in footfall. This is something the BRC-Springboard has been recording for several years.
There is always hope
So what can be done to structurally and effectively improve the lot of the shopping centre, especially in a world where we expect consumer behaviour to continue to reflect developments in digitisation and to focus upon wellbeing and sustainability, the latter a broad-based subject that is at the heart of this issue of Property Week?
Multi-dimensional problems tend to require multi-dimensional solutions. As such, I sense that the crisis of the shopping centre needs some central co-ordination, with all stakeholders participating and taking responsibility.
There is a danger that real structural damage could occur if private and public capital does not work in substance and at pace on this front, with concomitant implications for the vitality, welfare and asset value of towns and cities. In this respect, I should add, more official reports, gurus and tsars are not necessary!
Fresh thinking should embrace the myriad evolving technologies, enhanced by 5G, the need for affordable housing, the growing flexibility of work and the need to improve the nation’s wellbeing around diet, physical movement and the provision of public services.
Allan Lockhart, among the most forward-thinking real estate business leaders in the UK, speaks of embracing the ‘civic’ in towns, a wonderful heart-warming term, and his NewRiver REIT is at the forefront of new, necessary, public-private solutions that can shape a better and fundamentally more sustainable future for millions of square feet of tired, under-utilised but often prime-located space.
New shopping centre solutions also have the opportunity, nay necessity, to embrace the green agenda, including lowering inputs; adopting renewable energy, recycling and carbon sequestration; and educating the public.
Collective, serious, imaginative and intelligent thought can still turn millstones into gems but we need to get on with it. If we do not, then an urban cancer is going to be more and more debilitating to our town centres.
Dr Clive Black is director at Shore Capital Markets