Is bigger better?
Published: 09 March, 2011
Over the past 20 years the trend has been for shopping centres to get bigger and bigger.
Sean Kelly investigates the rise of the mega-mall.
It could well be that there is a natural limit on just how large UK centres can feasibly become, based on the general evidence of shopping centre development and sizes over the past 20 years.
Trevor Wood of Trevor Wood Associates believes the story behind the UK’s shopping centre size statistics over the years is a compelling one.
“It’s interesting to note that from the table there are 11 schemes in 1991 that were 700,000 sq ft and above,” he says. “In 2011 there are now 40 schemes. Furthermore back in 1991 there were just 18 schemes of 500,000 sq ft and above. Now there are 67. Bigger may seem to be preferable in the industry but whether that’s what the general public feels I wouldn’t like to say.”
Wood notes that historically some of the biggest schemes had supermarkets as anchors but that this has changed over the years. “Shoppers tend to treat the supermarket shop as a separate journey so in the past few years a number of landlords have cleverly asset managed those supermarkets by finding a location outside or adjacent to the centre and then filling up that vacant space with a wider variety of retailers,” he says. “This was the case at MetroCentre and also at Almondvale in Livingston. Centres like these have been proactively asset managed to increase their overall appeal.”
One other trend clearly shines through with regards to the 20 largest in 1991 and now, according to Wood. “I would imagine that we are close to the apex of the maximum size of a shopping mall within this country – at least in the foreseeable future,” he says. “I think in the UK while it may seem preferable to be big, the creation of bigger and bigger shopping malls is not something we aspire to.
Too large a centre and it can become unwieldy for the consumer. If you look at recently-opened centres they have been about 1.5m to 1.6m sq ft in size. Westfield Stratford, which opens later this year will take us to 1.9m sq ft but we’re unlikely to see more of that size for some time to come, given the current economic climate.”
Mark Teale, director of retail research at CBRE, believes that the cyclical nature of the economy has left clear imprints on retail development.
“Developer appetite for bigger shopping centres strengthened markedly following the 1980s boom,” he says. “During the 1980s, the development of shopping centres accelerated but relatively small centres in secondary trading locations continued to proliferate. It was the smaller secondary centres that tended to come a cropper in the early 1990s downturn. Post-recession focus shifted sharply towards large dominant centres and extensions to centres with a proven track record – essentially a low risk development strategy.”
Teale also cites UK market maturity. “The biggest development surge for the shopping centre industry in town centres was actually in the 1960s and 1970s,” he says. “Following the 1980s recession there was another development surge but cumulatively it wasn’t as large. The floorspace added following the 1990s recession was less again. The gradual decline in the rate of development in town and city centres is simply because most of the best sites were developed years ago: it has become increasingly difficult to find new ones that are viable, hence the continuing pressure for A1 shop space out-of-town.”
And ahead? A development surge of any size would be welcomed by the industry facing an anemic development pipeline. “The development pipeline will remain subdued for the next couple of years in the wake of continued economic uncertainty,” predicts Sarah Banfield, associate director research & forecasting for Colliers International.
“Retailers have indeed become more selective in their location planning but there are plenty that are still on the expansion trail and a growing shortage of available units that meet the occupational requirements of today’s retailers will ensure that competition for quality space will intensify over the coming years,” Banfield adds. “This will serve to act as a catalyst for recovery in the development market from 2014 onwards as pre-lets are secured and schemes that had previously been put on hold are kick-started again.”
Dan Parr, associate partner at location planners CACI, also believes there’s more development activity on the horizon.
“Since early 2010 we have been involved in assessing development appraisals,” he says. “We had been conducting them since 2007 but they dropped off the edge of the proverbial cliff in October 2008. Now these proposals are growing in numbers and variety.
“The previous approach to property development was ‘build it and they will come,’” Parr adds. “Assessments were about understanding the potential for a 1m to 1.5m-sq ft development.
However, the assessments we’re getting now are different – they are “what is the optimal additional space this city or location requires?” and they are a lot less bullish. Developers have become smart and research savvy.”
But where will they build?
The Office of National Statistics uses patient address changes to help record the UK’s internal migration for the circa 62m UK population (In 1991 it was 57.4m). The ONS’ study of internal migration trends indicate around 2.5m relocations for 2009.
North East England, Yorkshire, West Midlands, and London all showed higher outward than inward migrations. The South West, South East, East and East Midlands saw increased migration while Wales was static.
So take your development pick. In any case, CBRE’s Teale further believes that retail and shopping parks are early beneficiaries of the present downturn.
“Most major towns and cities have one or more big schemes,” he adds. “The effective prohibition on out-of-town shopping centres has meanwhile resulted in comparison goods shopping demand spilling out into retail parks. More recently, essentially for the same reason, grocery stores have begun to steadily increase their non-food merchandising in out-of-town stores.”
In 1991 John Strachan was running the retail agency for the South coast of England for what was known as Healey & Baker. Today, as chairman of retail for Cushman & Wakefield, his parameters are global and his view far more pragmatic.
“In 1990 we were heading into the worst/longest recession that anyone in the market had known,” he recalls. “It seemed a lot worse than the 70’s. We were on the end of a shopping centre boom – 1985-1990 – and some centres opened with only three or four out of 50/100 shops trading. We were entering a very bleak leasing period and, of course, one in which there were very few new starts.
Boots Properties were probably the most active developer for the next few years.
“Some things don’t change: Oxford Street remains as a globally dominant retail destination and Bond Street as perhaps the greatest luxury street. Regent Street has joined them as one of the world’s great shopping streets. However, the UK regional shopping centres have created new locations with huge footfall – and spend. As a result many second- or third-tier high streets are nothing like as busy as they used to be on a Saturday 20 years ago. The great challenge for the industry over the next decade is to create a viable role for many of the country’s secondary centres”.
