London and the South East: How does retail in the capital cope in a recession?
Published: 02 October, 2009
London and the South East is still the most affluent part of the country, despite the credit crunch. How are its malls faring in the downturn?
One development which is currently progressing is Wembley Central, a £90m mixed-use project at the heart of Wembley town centre being carried out by Sowcrest, a 50/50 joint venture between St Modwen and Rotch.
The London Retail Consortium is the regional arm of the BRC, and the fact that it has its own representation underpins how important the capital is to the UK retail scene. The BRC calculates that in 2008 the region accounted for 19 per cent of total UK retail sales, with £52bn passing through its tills. Over £4.5bn is spent in the West End alone, making it the UK’s top retail centre. Or putting it another way, London’s economy is larger than those of Austria, Poland and Norway.
However despite its economic might London has not proved immune from the downturn. The LRC calculates that in August 2009 retail sales in central London were down 5.9 per cent, on a
like-for-like basis, compared with a year ago, when they were growing at 8.6 per cent.
Retail footfall in August was also down year-on-year. The LRC’s analysts say better weather than last August’s downpours meant people often preferred outdoor leisure to indoor shopping.
And London defines its catchment globally, which brings special factors into play: sterling’s weakness against the euro continued to attract European visitors, but the high-spending shoppers from the Middle East returned home before the end of summer this year, as Ramadan began earlier.
Despite this summer blip in trade Colliers CRE calculates that the region is the UK’s most resilient, on the basis that occupancy levels have held up far better than elsewhere. Oxford Street and Kensington High Street have the lowest level of retail voids in the UK at 7.2 per cent and 8.7 per cent respectively.
However, while Kensington High Street is performing well in comparison to other national centres, both the proportion of empty units and amount of void floorspace has risen since last autumn when the void rate was running at just 2.3 per cent.
Colliers’ report is diplomatic when it comes to ascribing blame for this surge in vacancies, stating: “It is unclear whether this is a direct result of the opening of the nearby Westfield London shopping centre at the end of October last year; however, it is likely to have been a contributing factor.” Others are less tactful, with the London Evening Standard blaming Westfield firmly for the street’s woes.
Westfield London itself appears to be going from strength to strength despite retailer concerns about the high level of service charge. The million-sq ft mall attracted its 10 millionth visitor by April 2009, and it is firmly on target to achieve footfall of 20 million during its first year of business.
Another example of a new mall making a big impact on its neighbourhood is Eden in High Wycombe which opened in March 2008.
According to Colliers’ research, High Wycombe has the dubious distinction of having the highest levels of retail voids in the country at 27.9 per cent. The agents conclude that the opening of the Eden scheme “has led to a direction shift in the prime pitch and footfall, meaning some retailers have relocated into the new scheme and others have simply been affected by a fall in trade and have had to close down.”
But within Eden the picture is very different. Despite the economic climate, lettings continue and the owners Brookfield and Aldersgate Investments have just unveiled another 10 lettings totalling 21,000 sq ft. New signings include Virgin Media, Ann Summers, F Hinds Jewellers, West One, Cargo Home Shop, as well as Café Richoux and Muffin Break.
According to Brookfield director Tim Buckley, Eden is now over 96 per cent let. “We have made excellent progress this year in very challenging market conditions,” says Buckley. With 14.5 million visitors a year, Eden’s footfall has risen 4 per cent this year, while the national average is down by 2 per cent, and parking at the centre is up by 20 per cent year on year.
“We’re now looking forward to a strong finish to the year and we have every reason to expect a very successful 2010,” adds Buckley. “Our existing retailers are performing well and the new stores are reporting strong trading figures within the first few weeks of opening.”
However High Wycombe is an exception and generally, London and the South East has not suffered from overdevelopment with new shopping centre floorspace and development activity largely ceased before the downturn hit.
The redevelopment of Wembley town centre will provide 135,000 sq ft of retail and leisure space, together with 24,000 sq ft of offices and 259 apartments. The scheme will also feature a new public square – currently under construction – which will provide new, safer open space outside Wembley Central train station.
Units have just been handed over to three major fashion chains, taking the regeneration of the area into a new phase. TK Maxx is taking 32,000 sq ft of space at £270,000 pa with Peacocks and Bonmarche sharing 15,700 sq ft on a 10-year lease. All three will open in October 2009.
Killian Morris, senior development manager at St. Modwen, says: “We have always believed that Wembley has huge potential, with Wembley Central train and tube stations at its heart. By attracting fresh new names, Wembley can now start to compete on a more level playing field with North West London’s out-of-town retail centres and the new development in and around Wembley Stadium.”
