Buying a secondary shopping centre would be a huge mistake - Commentary By John Milligan
Shoppers in the UK will be hard pressed for the next few years, and consumer spending will be constrained. Unemployment continues to rise and footfall in most shopping centres is lower than last year. There will be no quick return to rental growth, particularly as many shopping centres are over-rented. The increasing polarisation of shopping between convenience and experience means that many secondary shopping centres will struggle to survive.
There remains a lack of good-quality shopping centres for sale, but there is keen interest if anything does come to market. However, those tempted by today’s seemingly attractive yields to buy and hold a centre that is not prime, in the expectation that yield improvements will certainly add value, could be making a huge mistake.
The shopping centre development pipeline has been virtually immobilised. While it is difficult to make appraisals stack up and obtain finance, things are slowly improving. There is retailer demand in some towns, which is where we are looking at development opportunities.
We recently set up the Urban Market Company in a joint venture with the Fulford family, who founded London’s Camden Lock market. The company is seeking mixed-use regeneration projects centred on a market and retail community. It is all about tapping into retail trends and making them robust against the pressures of the downturn. They are run by shopkeepers with a provenance behind their products and a relationship built up over time with their customers.
We aim to harness the power of markets as part of contemporary mixed-use developments to create great “people places” that are a hive of economic activity. Markets can help us out of the recesssion because they have employment densities twice that of supermarkets, as well as encouraging social cohesion.
Camden Lock is 20% up on last year and most of this growth is from start-up businesses set up by people who have been made redundant or need to supplement their income. Some of these traders could be our future high street successes. In the meantime, let’s enjoy the vibrancy they add to our retail landscape.
John Milligan is the founder of specialist retail developer Milligan, whose most recent scheme in the UK was Metquarter in Liverpool.