Nick Bubb’s Verdict: Shopping Centres - Can they adapt to an online shopping world?

Shopping centres have a tough job to compete with online retailing these days, but the big landlords seem surprisingly confident.

With the eyes of the retail world on how Tesco is evolving and refocusing its hypermarket format in Watford, it’s instructive to look at what the big shopping centre landlords are doing to evolve and refocus their space, not least as Intu Properties have big plans to modernise and expand the old Harlequin centre in Watford just over the road from the retail park where the Tesco Extra store is.

Intu has certainly refocused its own image by changing its name from Capital Shopping Centres and rebranding all its centres, but although it is the UK market leader, it has three other big, rival UK-listed shopping centre owners - British Land, Hammerson and Land Securities.

At a time when England’s cricketers are, with some success, taking on the might of Australia, it is also worth remembering that some of our best shopping centres are Aussie owned, in the form of Westfield and rival Lend Lease, which are both global property giants.

They are also both listed companies ‘down under’ and they next report results at the end of August. The UK is a small part of what they do, but Westfield is busy planning its joint venture in Croydon, while also looking to extend the successful Westfield London in Shepherd’s Bush and extend the leisure offer at Westfield Stratford, around the Olympic Park.

And though not much has been heard of Bluewater for a while, the cult young fashion retailer Jack Wills is to open there before Christmas and Lend Lease’s 1999 1.6m sq ft scheme remains a busy and upscale flagship centre in North Kent, with a burgeoning catering and leisure offer.

Just as Tesco is targeting family dining to pull in more shoppers, the big shopping centre players are all working hard to improve dwell times by upgrading their catering offers, to enhance the destination experience that a large centre can provide.

Even the ubiquitous McDonald’s and KFC are moving more upmarket to compete with the new upscale burger chains and coffee shops, as well as the plethora of bars and restaurants that can now be found in the best centres, from Nandos to Carluccio’s.

Following the success of the champagne bar at Trafford Manchester, Intu has also put one into its big Glasgow Braehead out-of-town centre and is doing the same at Lakeside, for the benefit of the landed gentry of South Essex.

The highly successful Trafford Manchester (which opened in 1998) shows how important catering can be to a destination shopping centre, with over 10% of its total sales and a higher proportion of its rents estimated to come from the restaurants, bars and coffee shops etc in its huge food courts, but at the recently opened Trinity Leeds centre, Land Secs have gone even further with some 20% of its space let to catering operators.

‘Leisure’ too is an important part of attracting and retaining customers, with a large modern cinema now de rigeur for a modern centre (as Intu plans for its Watford centre extension). Although Metrocentre Gateshead no longer has its indoor theme park it has plenty of other family entertainment options. And at Glasgow Braehead, Intu is keen to make more of the indoor ski slope next to the main centre, just as Westfield plans to build one at Stratford.

So, catering and leisure is helping the big players fill the holes left by the contraction of once key tenants such as Arcadia and the near demise of retailers such as HMV and Game. And fortunately the biggest and most dominant regional shopping centres can still attract the big space users, in the form of the American and overseas fashion chains spilling out from their West End flagship sites.

It also helps if shopping centre landlords have some tenants who can sell the smartphone and mobile PC devices that more and more customers are using to order goods online, so Apple Store has now become a key tenant for big centres, and Intu has gone a step further by launching centre ecommerce websites and online order collection desks.

Despite the pressures from a largely stagnant economy and the cannibalisation of trade by online retailers, the major shopping centre owners are by and large reporting steady footfall and sales figures and are managing to replace tenants in administration with new retailers.

They are also working hard to extend their centres, as Hammerson is doing at Brent Cross, whilst Intu have a £1bn pipeline of extension and modernisation schemes, ranging from Watford to Lakeside and from Glasgow Braehead to Nottingham.

It is a less happy picture in the secondary and tertiary shopping centres away from the super-prime pitches in the big malls, so it is interesting to see the shrewd developers British Land (which still owns a big stake in Meadowhall Sheffield, as well as a chunk of Tesco superstores) bet against the crowd by investing in centres in small market towns like Barnstaple and Hereford.

And though Westfield now dominates the west and the east of London, with its huge centres at opposite ends of the Central Line, it is also worth keeping an eye on what British Land are doing in these catchments, having bought up old centres in Ealing and Kingston, as well as Tesco’s Surrey Quays centre.