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Shopping Centres

Industry Spotlight: Shopping centre extensions accounting for larger retail space expansion…

More than 2.7m sq ft of new retail space is due to open in UK shopping centre developments next year. However, more than half of that space is made up of extending existing centres. Sarah Davis, associate director at 3d Architects, looks at why…

According to research from global property group CBRE, there’s been 4 per cent year-on-year drop in new shopping space globally. But the number of shopping centre extensions is up, by around 50 per cent year-on-year, as centre owners invest in existing malls. This is particularly true of more mature retail markets in Western Europe, such as the UK.

New retail space from shopping centre openings and revamps in Britain are actually set to reach a four-year high in 2017, according to the UK Shopping Centre Development Report released last month by commercial property agents Cushman & Wakeman.

The spike in retail space will be driven by six new developments, the largest being the 580,000 sq ft Lexicon in Bracknell. However over half of the new space will be made up of eight extensions and redevelopments of existing shopping centres.

These extensions include the 740,000 sq ft extension at Westfield London to make it the largest shopping centre in Europe and the revamped Westgate Shopping Centre in Oxford, adding 488,600 sq ft of new space.

So what is driving this move towards more investment in improving existing centres rather than new builds? Let’s look at the factors working against new builds, before considering the trends fuelling the need for existing centres to expand and improve.

 

THE CASE AGAINST BUILDING NEW SHOPPING CENTRES

The economic risks

The first and most obvious reason is the additional risk and cost of establishing a new build project and taking it through the development process.

It takes a long time for a new shopping centre to come to fruition – typically between 10-20 years. Developers don’t want to hit the building stage during the depths of the recession, so ideally want a stable economic environment and prospect of a prolonged boom to forge ahead.

Although markets are not as bleak as in 2008’s recession, the increased political uncertainty around the world has impacted economic confidence and stability in the short to medium term.

This uncertainty may also stall consumer confidence and cause a slowdown in spending.

Additionally, the rise in online shopping is leading to reduced footfall for retailers with physical shops. So although the number of retailers has grown if you include online outlets, consumer demand has not, which means a potential oversupply.

The lack of new space

In our small and already overcrowded country, the supply of ample land suitable for new retail developments is also becoming more scarce, or much more complicated to bring together. By refurbishing or extending existing centres, planning permission is much easier to achieve and it also fulfils the landlord’s need to keep their offer fresh in an ever competitive retail environment.

The lure of ample space was what originally motivated retailers to move away from the constrictions of the city high street towards large out-of-town shopping centres, such Lakeside, Bluewater, Metro Centre and Meadowhall. This space allowed free parking, easy access and more room to service and deliver the experiences demanded by the modern shopper.

Though these spatial benefits still stand, size is no longer everything and offering the biggest spaces isn’t the only means to attract shoppers. That’s why existing centres are upping their game to increase their pull – to entice shoppers from further afield and away from their computers.

 

THE CASE FOR IMPROVING EXISTING CENTRES

Creating an more appealing environment for shoppers

One reason shopping centres successfully attract shoppers, and in turn satisfy retailers, compared to the high street is that they deliver an appealing and cohesive shopping experience.

Installing large department stores, such as John Lewis and Marks & Spencer as anchors traditionally worked well on the footfall front. But shoppers are now also looking for more variety so adding ‘new’ brands, experiential events and leisure facilities enhance the ‘destination’ appeal of a shopping centre and get visitor numbers up.

Centres under single ownership are best placed to deliver the additional facilities that shoppers demand. This helps to increase footfall, dwell time and loyalty to the benefit of all retailer occupants.  For the landlord, adding these new facilities maximises value from land they already own, reducing land costs and increasing the yield on that existing development.

Intu – the owner, manager and developer of prime regional shopping centres in the UK such as Gateshead’s Metrocentre and London’s Lakeside – is one operator doing this successfully. For each of its centres, it produces lifestyle magazines, seasonal promotion events and fashion workshops to add appeal for shoppers – as well as adding new leisure facilities.

Combining shopping with dining and leisure

What is common to these shopping centre expansions is the increasing amount of new space dedicated to leisure facilities, as owners look to address the latest retail trend. According to recent figures, almost a fifth of units in the UK’s top 30 shopping centres are leisure focused to help drive the next generation of customer engagement.

Leisure, shopping and dining are becoming inexorably linked, with eating or socialising becoming as much of a reason to visit a shopping centre as buying goods.

Indeed, recent findings by CBRE revealed that a third of all visitors to shopping centres across Europe, South Africa and the Middle East will visit a shopping centre just to eat or drink. According to this research, four out of 10 will then go on to shop, even if their original reason for visiting the centre was to eat or drink.

Evolving consumer shopping habits and working patterns has also influenced when people visit malls. According to an intu survey, two in five people are now going to a shopping centre during the week, as opposed to the weekend. So leisure activity is helping to justify extending the shopping day and centre opening hours.

Confirmation of this leisure trend can be seen in the latest proposals submitted last month for extending Meadowhall shopping centre on the outskirts of Sheffield. A £60m renovation project is already underway and the centre owned by British Land is now wants to invest £300m in a new 330,000 sq ft leisure hall.

This extension will provide entertainment and dining offerings to help the shopping centre become a more experience-led destination. Proposals include creating a new outdoor dining terrace plus replacing the existing cinema, adding a gym and a flexible leisure space for indoor golf or ten-pin bowling.

The arrival of big leisure operators

Considering this trend, large leisure operators are playing a bigger role within shopping centres. Intu Trafford Centre already has a Legoland Discovery and Sea Life Centre and intu Lakeside has announced plans to introduce Nickelodeon’s first UK shopping centre attraction.

This family entertainment centre will form part of intu Lakeside’s 225,000 sq ft leisure extension due to open in 2018, featuring adventure zones, attractions and themed rooms designed for kids’ birthday parties, as well as a dedicated dining area and retail space.

In conclusion, what’s clear is that consumer needs are getting more complex and demanding, so building more enticing layers of appeal onto already established shopping centres may be a quicker and easier route to attract customers. Thereby generating higher footfall, greater consumer spend and return rate for retailers and shopping centres.

If you are a retailer or shopping centre owner looking for advice on how to maximise value from your retail offering, please get in touch with us.

3d Architects Ltd

Tel: 01908 325230

Email: enquiries@3darchitects.co.uk

15 stores ‘disappearing’ from UK high streets every day, new analysis uncovers…

New data compiled by the Local Data Company (LDC) and PricewaterhouseCoopers (PwC) has revealed that an average of 15 retail stores a day are faced with permanent closure, as analysts found that 2,656 shops closed down on the UK’s high streets and retail parks in the first six months of this year.

Calculated as a slight increase on the 14 stores a day recorded in H1 2015, the number of new openings has also fallen and has led to a net 503 stores disappearing from shopping centres and high streets in H1 2016; representing the highest net decline since H1 2012, when 953 more stores closed than opened. (Fig 1).

Figure 1.

pwc-fig-1 

Inevitably, the analysis of 66,401 outlets operated by multiple retailers across 500 UK town centres, also pinpointed online shopping’s growing popularity to be a contributing factor; indicating there are over 22,200 click and collect services across 130 of the largest national retailers. Carphone Warehouse (+129), ScrewFix (+58), Toolstation (+36) and LloydsPharmacy (+33) have experienced the biggest growth in click and collect services between 2015 and 2016.

 

Read the full research here

 

BRC: Footfall declines but shoppers still spending…

According to the British Retail Consortium‘s (BRC) latest ‘BRC-Springboard Footfall and Vacancies Monitor’ for the five weeks between August 28 and October 1, total footfall for the month of September fell by 0.9 per cent compared to the previous 12 months; a return to the decline in footfall seen before the 0.1 per cent increase experienced in August.

The research found that footfall in retail park locations was also ‘broadly flat’ in September, worse than the 0.4 per cent rise in August, and footfall in shopping centres fell 2.5 per cent in September, a further fall from the 1.9 per cent drop in August and is below the three-month average of -2.1 per cent.

Chief executive at BRC, Helen Dickinson OBE said: “Total footfall was fractionally down this month with almost one per cent fewer people heading out to shopping locations across the UK. At the same time as both footfall and shop prices have fallen year-on-year, retail spending grew in September by 1.3 per cent. This is a function of the changing face of retail and the hard work and innovation of British retail businesses who are responding brilliantly to technological advances and changing consumer habits.” 

Destination and convenience ‘key for future-proofing’ shopping centres…

In partnership with the real estate firm, Savills, a new report from intu has found that brick-and-mortar stores continue to play a ‘vital’ role in the retail experience, with 43.4 per cent of respondents placing them in their ‘top three preferred locations’ for buying items such as footwear and clothing.

The ‘Spotlight: Retail Revolutions’ report established the preference for shopping centres was even more noticeable among ‘Generation Z’ (16-24 year olds) and ‘Generation Y’ (25 to 34 year olds), amounting to 62.9 per cent and 53.4 per cent respectively.

In addition, the possible opportunity for shopping centres to become ‘destinations’ in their own right and encourage customers to spend full days rather than stay at home and shop online is also presented, providing the added benefit of enticing a larger number of customers from beyond a centre’s traditional catchment.

Regional director at intu, Rebecca Ryman, said: “Striking the balance between destination and convenience is fundamental for shopping centre landlords wanting to deliver an overall offer and experience that meets the everyday needs of their local catchment.  A strong and diverse retail offer supported by the right leisure facilities and combined with ease of access are key to generating a wider appeal and thus helping to future-proof the success of a shopping centre.” 

Furthermore, the study acknowledges the need for convenience in terms of shopping centres is paramount for ‘Baby Boomers’ (55-64 year olds), who consider this as a priority than a destination. This goes some way to explain why a large proportion of Baby Boomers ranked small local high streets (45 per cent) and online shopping (40 per cent) in their top three preferred locations.