Shopping centres have struggled to compete with the online world. Traditionally the stronghold for avid shoppers, many have undergone a transformation from the bustling enterprises they once were to today’s sleeping giants. This process of decline tends to accelerate over time and ultimately risks landlords without financial resilience sliding into administration. The effect on local economies and communities is devastating. Countless regional towns, deprived of what was once a bustling and vibrant retail heart, are taking on the feel of ghost towns. But there is hope. The public sector has started to respond, and with the right advice, the green shoots of recovery are visible.
More and more failed shopping developments are being bought by local authorities as a means of direct intervention designed to arrest the decline of town centres and stimulate the immediate economy to get it back on its feet in a way the market alone isn’t able to deliver. Aside from the broader social and economic objectives councils have for their areas, moves like this are not just driven by altruism. The financial prospects of acquisitions like this can be attractive. Shopping centres are typically located in prime locations and can often be bought at prices well below their value even a couple of years ago. Most public sector purchases are viewed as long term business cases, they can access funds at low cost, so purchasing these assets with a long-term hold strategy can almost stack up on an ownership basis alone.
However, when a local authority considers a shopping centre acquisition its primary objective is to consider how it can be used to engineer a sustained resurgence in the local economy. There are many possibilities and councils are fortunately not fettered by the guiding commercial principles that typically constrain institutional owners. They can be more flexible about rents, lease terms , covenant and even use. Take for example Merseyway Shopping Centre in Stockport, where we are currently advising the local authority.
The Council bought this 344,983 sq. ft. shopping centre in 2016, after it fell into receivership in 2009. The asset is a five minute walk from the station, adjacent to the new Red Rock leisure development. Since the purchase, CBRE has helped create a strategy designed to create a stimulating retail environment that meets the demands of tomorrow’s shopper. Our advice has included further strategic acquisitions, an occupier acquisition strategy, and analysis of refurbishment and wholesale redevelopment options. The introduction of new facilities that meet the needs of the wider town is contributing to bringing people back to this once declining scheme. For example, a project to provide new ‘world class’ toilet, parent and child, and changing facilities at Adlington Walk which is part of the development, has just started on site, and is being managed by our Project Management team.
The former BHS building in the middle of the scheme, previously owned by a third party, has now been bought by the Council and work is under way to refurbish it to provide additional leisure uses that will contribute to the scheme at a level not previously seen. The future shopper is looking for more than just a simple buying transaction, they want an experience, entertainment and excitement. This is where Merseyway Shopping Centre’s future lies.
It isn’t just local authorities that are helping the retail landscape. Central government is contributing through funds like the future high street fund, which has made £1bn available for non-profit uses in the retail sector. Funds such as this are essential to help stimulate and accelerate the evolution of traditional bricks and mortar retail. These important interventions will always revolve around understanding consumer behaviour and being bold enough to seek to deliver change in a stagnant property landscape.