It may sound paradoxical, but falling consumer spending is triggering a retail boom, as shop owners employ upgraded design and the latest thinking from the States to stimulate shoppers’ spending reflex.
There’s been a growing sense of gloom on Britain’s high streets and shopping centres in recent years. Higher interest rates, mounting consumer debt, the weakening of the housing market and the London Tube bombings have drained the confidence of consumers. Then there is the option of buying from internet traders who can offer goods at a sizeable discount. Retailers have responded with profit warnings and store closures.
So at MAPIC, the annual gathering of the retail property sector at Cannes in the south of France, you might expect an air of foreboding among the architects, consultants and contractors who work in this market.
Not so. Retail may be all about shifting merchandise fast and rapidly repositioning your brand, but it’s also a long-term business. Large shopping centres have an eight- to 10-year gestation period, and developments such as London’s White City or Paradise Street in Liverpool aren’t going to be halted by a temporary drop in consumer spending. The British Council of Shopping Centres says there is 1.5 million m2 of retail space under construction and a further 1.25 million m2 with planning permission.
“It’s a complex market,” says JM Erasmus, a partner at Davis Langdon. “Retailers are all at different stages and they are committed to having a presence in the big centres that are coming through.”
Neither can retailers and developers afford to stop spending on refurbishment. The most notable example is Marks & Spencer, which, despite spending two years in the financial doldrums, has just announced a £1bn refit programme across its 431 stores.
“They do invest quite heavily in refurbishing stores to support top-line growth,” says Erasmus. “In capital spending terms, it’s not as high as other cost drivers they have.”
And as weaker brands such as Allsports and Safeway fall by the wayside, their replacements must also be fitted out.
So retail will always be with us – but this doesn’t mean business as usual for the construction industry. There are tectonic shifts under way in retail strategy, and designers, consultants and contractors should take heed if they want to play in this important market. Here are the three new looks for this season …
1 Mix and match
In Cannes you could sense the shift away from massive malls built on greenfield sites that suck the lifeblood out of high streets. Instead, integration and regeneration are the watchwords. In the UK, planners are cracking down on out-of-town retail parks and demanding that developments include housing, offices and leisure facilities. This encourages smaller town- and city-centre schemes. Supermarkets such as Tesco and Sainsbury’s have led the way, but now DIY stores are following. Ikea is planning a store by Hillingdon Underground station in north London and B&Q has similar schemes in development in New Malden and Sutton.
Huw Williams, planning partner in retail development at real estate firm Cushman Wakefield, says: “There’s been a big shift by developers and retailers to do town- and city-centre projects, and the overwhelming majority of developments in town and city centres are going to be on this mixed-use model. The idea that this is going to go away and we’ll be able to build another Lakeside or Merry Hill is wrong.”
These schemes are far more costly than your average out-of-town shed – 10 times more, according to Geoff Wright, construction director at developer Hammerson. He estimates that a retail park costs £20m, takes 18 months to work up and a year to build. In contrast, a city-centre development could take between 10 and 13 years to get through land assembly and planning, two-and-a-half to build and cost £230-250m to construct.
Shopping centres need an emotive sense of place
Melvin Davies, retail design director, Broadway Malyan
They are also more complex – it takes a lot to cope with the logistical, safety and political issues presented by a working city-centre site. The conflicting regulatory pressures on mixed-use schemes are more intense too.
John Lewis, a partner at Davis Langdon, adds that the negotiation process is inevitably lengthened. “It’s more difficult to get them to stack up; there are more parties involved and the decision-making process is more complex. You have to build relationships with new clients and local authorities all the time.”
There is a bright side. Lewis says you’ve got to work harder for your money, but schemes are more interesting. “It’s far more complicated to manage but from our point of view that’s a good thing because there’s an opportunity for selling project management.”
2 Vintage chic
In trying to get punters to log off, roll up and shell out, developers are focusing on the way the whole leisure experience is designed. Adding cinemas and restaurants to the shops is one way, but to see the latest thinking you have to go to the USA, the birthplace of the mall. At MAPIC, the team behind the Victoria Gardens development in Rancho Cucamonga, California, described how they’d aimed at creating an entire new “downtown” rather than just a shopping centre. This meant designing a food hall to look like a converted packing warehouse and painting faded billboards in pursuit of authenticity.
“Shopping centres are not just closed boxes to put consumers in. They have to be environments that are entertaining with an emotive sense of place,” says Melvin Davis, director of retail design at architect Broadway Malyan. “You never see the buildings after your first or second visit; it’s how the place makes you feel. You have to be much more sophisticated as an architect.”
Recent shopping centres such as Bluewater and the Bullring in Birmingham have embraced this trend, but that means that older ones have been left behind and their owners are struggling to protect rents and retain tenants. Last year, property consultant CB Richard Ellis’ National Survey of Local Shopping Patterns found that 73 of Britain’s 2500 shopping destinations took half of all consumer spending on comparison goods.
This means that landlords have to review their basic environments. Paul Anderson, director of retail asset management at CBRE, says they need to make common areas look as good as the interiors of the shops. He adds that 40% of people who step over the threshold of a shopping centre don’t spend any money: “There’s a massive amount of conversion possible.”
Anderson thinks that, quite apart from the new high-end developments, the refurbishment market has potential. “This second tier of centres is having money spent on it,” he says, giving the example of the little-known Pavilions shopping centre in Birmingham, located 200 yards from the Bullring, where investor UBS just completed a refurbishment.
Aukett Fitzroy Robinson has already tapped into this market, installing new food halls, cinemas, floor finishes – anything to give a renewed sense of place and a visual lift. And it works. Alison Roennfeldt, the firm’s head of retail, says that at the Clyde shopping centre in Scotland, enclosing it with a glass roof led to a 30% increase in footfall and a 20% increase in sales. And although big schemes such as White City might take seven years to get off the ground, a faded secondary centre could be given a new lease of life in just 12 months, she adds.
The downturn is a blip – people will always want to shop
Melvin Davies, Broadway Malyan
Catherine Lambert, head of retail asset management at CBRE, wants architects to think more creatively about improving malls: better seating areas, toilets, customer information points and lounges that offer gift wrapping, mobile phone charging or locker services.
“You could come up with a niche little firm just tackling this,” she says. “Big architecture firms are looking at all of this for new developments but secondary schemes still need refurbishment. It’s small beer for a lot of the big firms but if the smaller ones come and talk to us, we could develop a package that could be rolled out to other secondary schemes.”
3 That’s so … this morning
Apart from the wider mall environment, stores themselves are changing as retailers seek to exploit fads. Lease duration is shrinking. Gone are the 25-year tenures of previous decades. Last month, figures from the British Property Federation and the Investment Property Databank showed that nearly two-thirds of leases granted in 2004/05 were for five years or less.
“Retail has always has to regenerate its look, but whereas it was a 10-year cycle now it’s more like seven,” says Lambert.
Stock turnaround is also accelerating, meaning that fit-out work is expanding beyond the traditional peak times of Christmas and Easter. “Once it was 18 months for a complete change of stock; now at somewhere like Zara it’s six to eight weeks. People go back to see what’s new,” says Davis at Broadway Malyan. He also foresees a trend on the high street for “pop-up shops”, trading only for a few weeks or months before they are replaced with something new.
With the pace of the market accelerating so quickly, contractors will have to follow suit. “Retailers have always been among the most demanding clients anyway, and as they squeeze costs out of the supply chain, we can expect to see procurement of construction work getting the same treatment,” says Davis Langdon’s Erasmus.
Just-in-time production revolutionised car making; the CBRE’s Lambert predicts the rise of the just-in-time shop. She gives the example of the Original Shoe Company in Princes Quay, Hull, that was up and trading in 48 hours. Shopping centre owners could consider employing fit-out contractors directly to prepare shops before retailers move in so they can start trading more quickly. “Landlords may have to offer a more turnkey solution. We would look at setting up a framework of contractors. The other advantage of that idea is that the landlord knows it’s being done within their guidelines, rather than having 80 different fitters,” says Lambert.
So for all the stories of doom in the business pages, the retail sector still looks like a bullish market for construction firms. “The momentum of the retail business isn’t slowing because of the downturn,” says Melvin Davis, director of architect Broadway Malyan. “What we do now comes to fruition in five to seven years. The downturn is a blip – people will always want to shop.”
Illustrations by Ben Kirchner