NOTTINGHAM CITY CENTRE RETAIL 2012 – ITS LIFE, BUT NOT AS WE KNEW IT

Retail News

The East Midlands largest retail property consultancy, FHP, says Nottingham must prepare itself for a period of significant change in the retail industry.

In its winter 2011-2012 Nottingham retail study, EG award winner FHP says that the city has proved remarkably resilient in the face of some of the most challenging conditions the high street has ever seen, with a retail vacancy rate which has edged up only slightly to 11.78%.  At the peak of the market in 2006 the vacancy rate was 9.2%.

Large scale investment in the city’s acclaimed transport infrastructure and the certainty that Capital Shopping Centres will redevelop its major malls mean there could be significant growth in retail footfall in years to come.

But FHP Director Ben Tebbutt, who leads the retail team, says there are clear signs that low economic growth, constrained consumer spending and the rapid advance of mobile internet are causing retailers to re-examine the way they do business.

“The truth is that retail is a trade that has never stood still,” says Tebbutt. “In the post-war years people still shopped in the local corner shop, the local butchers, the local green grocers, but the emergence of the supermarkets transformed what they had taken for granted, giving the customer everything they wanted under one roof. Twenty years ago a 2,000 sq ft retail unit constituted a large store, 10 years ago 5,000 sq ft was large, now 10,000 sq ft is norm with numerous retailers occupying 10,000, 20,000 and 50,000 sq ft stores.

“In recent years the power of the internet has had a profound impact across the retail industry. Yet the High Street is certainly not dead. While retailers themselves have been staggered by the growth of online sales, without their established shop fronts their internet revenues would not come close to what they are. Sites such as Matches, mywardrobe.com, Net-a-Porter and ASOS rely on established brands to provide their shop fronts, but I believe we will shortly come full circle and see online retailers on the high street.  My Wardrobe has taken sales stores in Nottingham for a number of years and we are currently under offer with a business which started life on the internet.

“To understand the power of the internet, look at the scale of the investment that Marks & Spencer has made in their online distribution centre at Castle Donington where FHP advised the developer, Clowes Developments. By any measure, it’s a giant – 1 million sq ft with its own rail head – and it amounts to a clear signal from one of the biggest names in retail that it sees huge growth in online transactions. This investment by M&S should be welcomed and not feared as it will create upwards of 1,000 jobs for the region.”

John Lewis, which is one of the most astute retail operators in the market, admitted recently that even it was surprised at the speed at which its online presence has grown. Its website is out-performing the combined revenues of its top six stores. So there is a fundamental shift taking place which has clear implications for retail commercial property.

But Tebbutt says this meteoric online growth may open up new high street potential: “On the other hand, the internet could provide the opportunity for John Lewis to open in smaller towns and cities. Instead of building a store of 150,000 sq ft at a cost of £30 million, they could look at a store of 75,000 sq ft and compensate for the reduced range through internet terminals within the store. Their click-and-collect service can also help drive pedestrian flow into the city centres and into their store.”

Alan Pearson, Associate Director at FHP, says retailers are embracing the internet dynamically: “Stores such as Jack Wills and All Saints all have iPads within their shops enabling customers to shop online from within.  The rapid growth of exciting, new communications technologies via smart phones and tablets will only assist retail. Only recently Boston Consulting estimated that, by 2016, 80% of website users will be accessing the internet by mobile phone.”

That retailers have gone bust is an unpleasant truth. Yet there are fundamental reasons why and FHP says that blaming failure simply on the state of the economy or the euro zone crisis just does not wash.  Tebbutt said: “No one was surprised that HMV have closed a number of stores. – Amazon and iTunes have seen to that. Yet in their place we have Apple, arguably the world’s coolest brand and a retailer desperate to open in Nottingham.  Peacocks have also gone bust. Why? Primark is simply bigger and better!”

Tebbutt says Nottingham’s long-term ability to adjust to an ever-changing retail market makes him optimistic about its prospects: “Nottingham is a great city, it is understandably frustrated that major investment in developing its retail offer has been further delayed, but CSC is a hugely experienced developer who have been an investor in Nottingham since 1974 and who already knows the city extremely well.  That makes me optimistic about what will happen over the next 12 months.”

David Hargreaves, a founding Partner of FHP, said that the pace of change in an increasingly dynamic retail market suggested that local authorities must be willing to embrace change: “The retail market has always been dynamic and continues to change, but the pace of change has certainly increased significantly over the last few years. What is required from the Local Authorities and the powers that be is a flexible structure that allows a city to react quickly to those changes. What we do not need is a lot of red tape and a prescriptive approach.

“I would like to see the city centre planning structure that allows for A1 retail, A2 financial services, A3 restaurants and the like removed so that anybody wishing to open a business in the city centre is free to do so irrespective of their use. This may well see the likes of doctors and dentists appearing on the high street in a city centre in a location that is convenient and provides linked shopping trips.

“One of the best performing sectors over the Christmas period has been the restaurant sector.  As we eat out more, restaurants become an increasingly important part of the offer and will enable city centres to complement internet retailing by making the shopping trip a leisure experience, which sitting at home in front of a computer can never be.

“We are likely to see a migration of fashion retailers into shopping centres, which can provide units of a size required by today’s retailers and their customers, whilst the historic fabric of the existing city centre becomes an eclectic mix of smaller businesses – providing the variety and choice that is sometimes missing in our centres. Indeed, there has never been a better time to set up a new retail business with landlords prepared to provide short-term leases or licences at reduced rents without personal guarantees.”

David Richardson, the newest member of FHP’s retail team, added: “The basic dynamics of the Nottingham retail economy haven’t changed.  It has a huge catchment with some very affluent pockets and it is a destination where people come to do more than just shop. It’s also on the cusp of huge investment in infrastructure with two new tram lines, the transport hub at the railway station and the widening of the A453 all going ahead.  Outside London, I don’t know of any other city investing on a similar scale and it’s going to make Nottingham an easy destination to access.

“But we shouldn’t just assume that means everything is rosy.  The economy is changing, technology is racing ahead, and that’s bound to have implications for the shape of the city centre.  All the stakeholders in Nottingham’s retail’s economy need to consider what this all means and provide a flexible and dynamic structure in which the city can thrive.”

David Hargreaves concludes:  “With the growth of internet retailing and the difficult economic climate there is no doubt that a city like Nottingham probably has too many retail units, particularly on the periphery. We need to be opening up the planning system to allow alternative uses in these retail units, be it residential, student accommodation, cafés, restaurants, coffee shops, doctors, dentists, vets – there are many opportunities.  We also need to make sure that the size of retail units on offer to those retailers that do want to come to Nottingham – and there any still many – are fit for purpose.  Retailers no longer want shops of 1,000 sq ft.

“Despite the prevailing doom and gloom we believe it is an exciting time for Nottingham. Over the next 5–10 years we will see a dramatic change in the heart of the city, the development of the Broadmarsh Centre and the extension of the Victoria Centre.  It will not all happen at once, but with CSC in a position to drive the regeneration of the city and Nottingham City Council making it very clear that they are open for business the various parts of the jigsaw may at long last be coming together for the benefit of all those that live and work in Nottingham.”