Driven to change

Marks & Spencer chief executive Sir Stuart Rose is no doubt used to seeing the industry hang on his pronouncements, but his comments on the rising cost of fuel benefiting the high street at the expense of out-of-town retail certainly struck a nerve.

Back in June Rose told the British Retail Consortium conference: “I’m optimistic about the high street. It has had its low point. We won’t see any more Bluewaters. I think we’re pretty much done out-of-town.”

As if to prove his point, the three headline schemes to debut this year are all located in or near city centres. The opening of the first phase of Liverpool One has put retailing in the city back on the map and given neighbour Manchester and more specifically The Trafford Centre a new rival. Cabot Circus should revitalise Bristol’s retail market, making the city a stronger competitor for Cribbs Causeway, while Westfield London will not just rival the nearby West End, but will act as an alternative to Bluewater for long-distance catchment.

So by the end of the year, the UK’s big out-of-town centres will be facing a double whammy of more competition and less affluent consumers. Peter Todd, director at investment company Resolution Property, says: “My feeling is that when people are looking at reducing their fuel consumption they are probably going to look at their commute.” He believes that consumers will keep going on weekend social trips to the super-regional centres, which have a huge range of tenants.

Todd believes that centres may need to get more imaginative, perhaps incentivising car pooling, improving bus pick-ups from city centres and doing everything that they can with their travel infrastructure – especially encouraging train travel where possible.

King Sturge partner Mark Rudman points out that the situation is unlikely to be the same all over the country. “There is no doubt that petrol prices may make some shoppers think again about driving to a retail centre, but there are differences in the impact depending on where you are in the country,” he says. “For example, many shoppers going into the city centres of Manchester, Liverpool and Leeds actually drive in anyway. And the stop-start driving in the cities and cost of parking may negate any cost savings.”

Atisreal head of retail agency Ian Parish feels that Bluewater in particular represented a change in thinking for the mega centres. “Certainly for those centres with catchments of an hour, 90 minutes, even two hours, the reality is that petrol prices are going to make some people think twice and that’s just something they are going to have to accept,” he explains. “But since 2000 and Bluewater we’ve seen the rise of the leisure experience as centres looked to keep people for the whole day, or certainly half the day. Those elements are going to become much more important.”

For Parish, this means the big centres will need to look at attractions such as fashion shows, children’s entertainment and big-screen football. “But it also means that if shoppers have driven for an hour, they don’t want to spend another half an hour getting into the car park,” he points out. “Management, access and traffic flow are all vital.”

Indeed, the consensus seems to be that in these difficult times, out-of-town centres need to offer consumers a package of reasons to visit. Jones Lang LaSalle director and retail advisory team head Vince Prior stresses that the situation is far from straightforward. “To say city centre good, out-of-town bad is too simplistic. After all, someone might drive right past a centre on the way home from work, so clearly the out-of-town location would not have an impact on fuel spend,” he says. “The challenge for the centres built 10 or more years ago is how they respond to the newer centres where the latest thinking in design, leisure and public space is evident.”

Parish adds that, as part of this, a more flexible approach to the tenant mix is needed. “They need to attract more overseas retailers, they may need to be more flexible about the deals with their tenants, and also they need to look at bringing in local and smaller retailers, and being more flexible about covenants,” he says. “Obviously this is more of a risk, but those store chains with perhaps four or five stores are often not capable of handling trading from a shopping centre location,” continues Parish. “The service charges and rents are very high for them and even turnover rents may be problematic for businesses not used to them. Managers need to be more enlightened – the success of Marylebone High Street really demonstrates that and centres have to be equally prepared to move with the times.”

Mark Holmes, head of asset management with investment company and centre operator Moorfield Group, says: “I think that cities with a strong coffee and food offer will still be able to attract shoppers. Even if they don’t have as much to spend in the stores, if they are going out for the day they still want to be able to have a nice cup of coffee somewhere.

“We’ve been working very closely with our retailers, and have increased the marketing spend at all of our centres. A lot of the marketing is about getting involved with local activities. We are running fashion shows, we’re working with art colleges and at Cardiff Capitol we’re running a Face of Capitol competition. The winner will be used in all our marketing material for the next 12 months.”

Holmes agrees that operators need to be more flexible. “No one wants to see a vacant unit and owners are going to have to be more flexible about how they fill that space, perhaps even with temporary lets. To me, anything looks better to the shopper than an empty unit,” he says.

The biggest UK schemes are confident that they can buck the downturn. The Trafford Centre operations director Gordon McKinnon is adamant that the centre has evolved through a long-term strategy of adding more tenants to the centre.

“We have been very clear about how we keep The Trafford Centre as an interesting place for people to visit. About three-and-a-half years ago we opened up John Lewis, two years ago it was the M&S and at the beginning of this year it was the Great Hall dining area with upmarket restaurants. More recently we have opened the Barton Square homewares and furnishings extension. You have to constantly give people new reasons to visit,” he says.

“People want to know that something is going on and we’ve added the snow centre, a cinema that at certain times of the year is the second busiest in the country and we have events like Cirque du Soleil. At the moment, we are setting the car park up with a pit lane for the BMW Sauber Formula 1 team, which is bringing its cars over.”

Like Holmes, McKinnon is a strong advocate for the role of food and drink. “We saw at an early stage that the food and drink offer at the centre needed a better standard of eaterie than you often find in a shopping centre,” he says. “If you have ABC1 consumers shopping, they want to eat and drink at places in keeping with their outlook.”

Bluewater is also confident that it can keep shoppers coming back through its doors. The shopping centre experienced a 2.8 per cent footfall increase in May compared with the same period last year, bolstered by two strong bank holidays. Bluewater general manager Andrew Parkinson says: “The figures underline the fact that consumers’ attitudes remain undaunted.”

However, the biggest issues may not be with the UK’s headline schemes, warns Resolution’s Peter Todd. “Where I can see the biggest problems are with those centres – and they could be out-of-town or town centres – where that critical mass is not quite enough,” he says.

“As an example, Kingston-upon-Thames as an entire shopping location has the critical mass needed to continue to draw consumers. But if the Bentall Centre was in isolation, it would have far more difficulty. So my concern is with the more rural locations – Durham, Chester, Cambridge or Oxford – markets with a local population of about 200,000 but which in reality draw from the surrounding towns. In these times, shoppers will be asking why they should pay a fortune to get into and park in the towns – in other words, some of the loveliest English cities could be hit hardest by the downturn.”