New Apartments Won’t Save Your Town Centre Retail

Forget an influx of new residents saving a retail centre. A cinema won’t do it, nor will a supermarket or a food hall.

As retail vacancies rise and rents drop, owners of shopping malls and town centres have been adding other uses to encourage visitors to come back to destinations shunned due to the rise of online retail — and the fact many of them offered little in the way of unique attractions in the first place. 

Now, increasing data shows that adding a single new use to a retail scheme won’t do much to increase the value of a retail element. 

“As retail has contracted, people have looked for something to fill the gap,” Benoy Director Robert Bentley said. “First, everyone wanted a Tesco, then it was a cinema, then food and beverage, and now it is all about resi. But residential is not the answer [to improving the value of retail schemes] for the vast majority of the UK."

According to Bentley, “There is no one-size-fits-all solution.”

Residential apartments on top of retail schemes has become a trend due to the shortage of housing in many parts of the country. More housing was supposed to equate to more people in town centres or malls using those struggling shops and restaurants — a supposed win-win. 

But data from Pragma, a consulting and data business that is a sister company of architect Benoy, found that adding a large number of residential units doesn't easily translate into significant extra footfall for retailers or demand for stores. 

The addition of about 800 residential units to a town centre means an extra 1,630 adult residents, Pragma found in a study. This could add about £8.7M in additional nongrocery spend to an area, and an individual shopping mall or town centre might capture about a third of that, on average.

That roughly calculates to about £2.85M of extra spend for the retailers in a location that has had residential added to it. Though that’s not to be sniffed at, spread across 50 or 100 shops or more, it doesn’t get very far. In simple terms, it is probably enough turnover to sustain two or three national retailers, depending on rents, Pragma said. 

“We absolutely see the benefits that residential brings: vibrancy across the day, weekday and weekend, a sense of pride and ownership of an area, the use of redundant space, use of brownfield versus greenfield land and many, many more,” Pragma Director Andrew McVicker said. 

“But local authorities and developers need to be wary that they don’t repeat previous mistakes and assume, for example, all ground-floor space can be commercial or that retail, which is failing now, will necessarily be viable post the addition of more residential.”

The same phenomenon is true of things like medical centres or food halls, Pragma reported, a finding that is backed up by other data insight firms. 

“If people didn’t visit a retail centre before, they won’t necessarily visit now just because they’ve come to a supermarket or a medical centre,” Visitor Insights CEO Isabelle Hease said. 

Hease pointed to the addition of major leisure operator Gravity to the Southside shopping centre in Wandsworth. While this has increased footfall in Wandsworth, those new visitors haven’t necessarily visited other retailers in Wandsworth town centre, the company found. 

“If you add a supermarket to a shopping mall and make it really easy to park outside and provide a separate entrance, those people are not necessarily going to visit the rest of the centre,” she said. 

New uses might be valuable in and of themselves. Don’t rely on them, however, to lift demand and value of the retail overall, Hease and McVicker said.

Instead of thinking about additional uses and hoping people that use one part of a scheme also use another, Hease said, successful repositioning of retail involves finding uses that are complementary to each other. 

That is a philosophy shared by Legal & General Investment Management Head of Retail and Futuring Denz Ibrahim, who was brought in by the UK pension fund manager in 2019 to rethink the investor’s retail assets. 

One testbed for new strategy was in the southern seaside city of Poole, where L&G owned the 430K SF Dolphin Centre and surrounding retail assets, forming part of Poole's town centre. 

L&G set about a major overhaul of the asset, taking 10 shops it owned on a street called Kingland Crescent and renting them to smaller retailers free of charge. It added an 18K SF coworking space called Foundry, a 20K SF NHS clinic and a skills and education centre offering vocational courses to local people. 

On top of this, it established an events programme that has run around 1,200 events in the last two years. 

“It’s about moving beyond mixed-use into what we think of as blended use,” Ibrahim said. “We’ve future-proofed the environment for visitors and occupiers and the revenue streams for our investors.”

Ibrahim said the Kingland Crescent part of the scheme had been a catalyst for rethinking the entire centre and that all 10 of the occupiers there are now paying rent. It is not the same 10 occupiers as at the start of the project — some have exited, and new brands came in — but all are now paying customers.

Data now shows 52% of the people that used the medical centre also used the shopping centre, he said, making it a new anchor tenant for the retail element of the scheme.

L&G has already taken parts of its strategy and applied it to other town centre retail schemes, adding an events programme and a Foundry coworking scheme at its 350K SF Beacon shopping centre in Eastbourne. The next stop will be taking parts of the strategy and adding it to its retail parks. 

“You have to take what you can replicate, that mix of retail, education, culture and workspace, without having a cookie-cutter approach,” Ibrahim said.