Capacity/Increase floor space – is there the capacity?
‘On the face of it, the last thing we need is more floor space’, said Richard Hyman. And yet, as he noted, there is a lot of floor space coming through over the next 5 years and conditions are right for developers to provide new shopping centre floor space.
In fact, around 20 million square feet of floor space is expected to be delivered between now and 2009. That space is mostly in shopping centres and town centres space, as opposed to the trend of the last 5 years where more out of town space has been developed. This is largely due to the tightening of the planning systems. According to Akers, that 20 million square feet accounts to just 4% of total retail floor space in the UK, although it’s about 12% of shopping centre floor space, so having said it’s a large amount of floor space, it’s not huge in the great scheme of things, but set against the pressures of price deflation and other costs rising, and perhaps a fragile market, it’s going to cause some problems for owners of property.
Hopefully, most of this new floor space will be successful, assuming it’s well conceived. Inevitably, there will be some floor space which is no longer viable and will be converted to other uses.
Hyman made the football analogy of a ‘premiership’ of retail locations emerge as the law of diminishing demand prevails slows and capacity grows. As returns diminish, the gaps between 2nd, 3rd and 4th division centres may get greater.
Centres that provide an environment and shopping experience which attracts customers will be the winners according to Akers - “More than ever, there is a need to target particular customers and excite these people with exciting, dynamic shopping environments.” He mentioned one such development - Gunwharf Keys in Portsmouth; a factory outlet centre designed to provide a superior shopping experience. Customers don’t go there to spend at a particular shop, but to enjoy a fun day out there. The occupiers can be successful by maximising the opportunity to make as much money as possible from these customers while they’re there, regardless of how much the market is taken by other retail locations or online retailing.
Hyman noted that in early November 2006, despite a background where retailers have to run faster to make a decent return, two of Britain’s best-known and biggest retailers announced significant physical expansion programmes. One of whom is John Lewis who have traditionally opted for a large size department store and announced a more flexible approach.
Ironically, Gareth Thomas said that John Lewis was inflexible in terms of its requirements in the sense that they were not very good at running anything other than full line department stores. Determined to continue running full line department stores, they need at least 140,000 square feet and some 70,000 square feet of support space by the side of each store. In each store there are 350,000 SKUs in each one of the stores. That is the format John Lewis is looking for over the next 7 or 8 years. By 2013 John Lewis will have added 50% to the space of the Group and should have doubled its size in 12 years time. Although Debenhams has more stores; trading in 120 locations, some are quite small.
John Lewis has 26 shops in the UK and believes that maintaining conventional full line store retailing is very much the way forward. At the moment they have no presence in Cardiff, Leeds, Manchester or Birmingham, and there is a whole wave of developments on the horizon, with Stratford being a good example where there is the capacity to take a shop of the size we like to operate.
“More floor space is being developed in shopping centres and less out of town because of the tightening of planning systems.”
Richard Akers
