viewpoint
Published: 04 December, 2008
I was particularly struck by a brief speech Glenn Aaronson, chief executive of Multi Development, made in London last month. He said that we will only survive the unprecedented storm now battering us if we stick together. It was a salutary message at a time when banks are stabbing borrowers in the back, when landlords and tenants are at each others' throats. But the fact that he felt it necessary to speak in such terms at what should have been a time of celebration - Multi Development UK's fifth birthday - made me realise that we really are in a crisis.
Lest anybody still be in any doubt that we are on the brink of a recession, following the Monetary Policy Committee's extreme reaction, the International Monetary Fund now forecasts that the UK will be worst hit of all the developed nations, with output expected to fall by 1.3 per cent next year.
Consumer confidence has fallen to new record lows, according to the latest consumer confidence survey from market research company Nielsen and the BRC.
Eighty-four per cent of people in Great Britain now believe the country is in recession, up from 65 per cent in May. Only 18 per cent think the country will be out of recession within a year.
So every indicator says we're in for a bumpy ride, and one that will be all the bumpier because of the surge in new space which arrived on the market this year, precisely when it was needed least.
When a developer pushes the start button on a shopping centre project, he has no way of knowing what economic circumstances will greet its opening. It's a leap of faith. The thought process is: demand for shops has been rising, consumer demand is rising, rents are rising. Let's provide something to be delivered in the future to meet that need we've observed in the past.
Inherently flawed, the process is fraught with risk. And it's for taking that risk on board that property developers are rightly rewarded.
And no developer has deserved its reward more than Westfield. To buy a half-built centre and then tear up the plans, redesign it and even demolish some parts already built was a very brave step.
It's been a long and difficult process, and if stories of builders still working while shoppers were queuing up outside are to be believed, it was very nearly late.
But the opening of Westfield London was quite simply a triumph. Although some key brands did not made the opening date, and the Village luxury retail zone was sparsely populated, it's already apparent that the centre sets new standards for the industry in the way, perhaps, that Bluewater did a decade ago.
And perhaps the comparisons go back even further than that. London has seen nothing like it since the opening of Brent Cross.
Everyone had been confidently predicting that trade in King Street, Hammersmith and Kensington High Street would be hit by Westfield. But early indications are that Oxford Street, Bond Street and Regent Street in the West End have suffered a significant slump in shopper numbers as well.
Of course there is a massive curiosity factor: Westfield's extensive marketing built up strong public awareness of the new mall, and London's shoppers naturally wanted to take a look. But if the West End does see a permanent loss, then it will be a real challenge for the retail industry: Central London has been the flagship location for British retail for more than a century. The costs of trading there are massive but so, until now, have been the rewards.
Marks & Spencer's Sir Stuart Rose said at the Westfield launch that Oxford Street needs to sharpen up its act.
The New West End Company has made a big improvement to cleanliness and security, but the biggest problem with the West End - especially when compared with Westfield - is traffic. An oppressive wall of red buses constantly divides the two sides of Oxford Street.
This is exactly the wrong time for the Mayor of London to scrap plans for the Oxford Street tram shuttle. The best Boris can now offer is to truncate a few bus routes so that they stop short of Oxford Street.
Retailers and landlords need to exert concerted pressure on the politicians. As Glenn Aaronson advised: stick together.
Graham Parker, Editor
