As the UK retail sector continues to take a battering from rising costs and a spending squeeze, it is becoming increasingly less common to see proposals for shopping centre extensions.
One of the largest, scheduled for 2020 – a £1.4bn extension at Brent Cross in Barnet – was put on ice by Hammerson last month.
However, intu is bucking this trend by placing its bets on two retail extensions opening this year, at its Watford and Lakeside centres.
The first of these – a £180m scheme at Watford shopping centre, Hertfordshire, adding 380,000 sq ft to the 1m sq ft complex – is preparing to open its doors on 27 September. Construction began in November 2015.
A further £13m investment was made earlier this year to replace the centre’s existing flooring, ceilings and lighting, as well as upgrade car parks and toilets.
What’s in the scheme?
The extension will house 13 fashion units, 11 restaurants, two leisure operators and a 113,000 sq ft Debenhams in phased openings. Each category – retailing, dining and leisure – will account for around a third of the extension.
Debenhams, New Look, H&M, Superdry, Jack Wills and Yo Sushi will be in the first tranche of launches, followed by a 40,000 sq ft Cineworld multiplex and dining operators in the beginning of December. A 23,626 sq ft bowling venue, operated by Hollywood Bowl, will make its debut around mid-December.
Rebecca Ryman, regional managing director at intu, explains that several retailers are driving the staggered launches.
“Most of the larger fashion players wanted to open as close to Debenhams’ launch as possible. The timings have depended on their own shopfit programmes as well,” she says.
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It is quite rare these days for a shopping centre operator to concentrate its efforts on expanding its bricks-and-mortar fashion retail offering. But according to Ryman, fashion has been “particularly strong” in terms of leasing.
“The key fashion brands, and young fashion, want to open flagship stores here,” she says, citing Jack Wills among the retailers that were “particularly attracted” to its demographic profile. According to property consultancy CACI, 83% of the centre’s customers are drawn from the most affluent ABC1 socio-economic group.
Progress with lettings
The centre is currently 70% fully let by area, while another 14% is “about to exchange” and an additional 9% is in detailed negotiations. The remaining 7% is classed as a development unit, which intu will not be able to let until 2019.
Ryman adds: “All the leases are long-term commitments – all the names we have signed up, or are in advanced discussions with, are not trials or pop-ups but long-term retailers on standard lease lengths and breaks.
Retail extensions set to outstrip new schemes by 2020
“We had every confidence that, with our high demographic profile and proximity to London and the Home Counties, we would be able to let it – and we have.”
The recent spate of closures in both the fashion and casual dining sectors has likely knocked confidence at several UK shopping centre operators – administrations and CVAs had a 0.9% effect on intu’s group like-for-like net rental income in the six months to 30 June – but Ryman remains unruffled when it came to Watford’s extension.
“If you look at our existing offer in Watford as a town, there isn’t much at all. I believe we are not providing an oversupply,” she says. “As long as we are realistic in terms of the volume of the offer we are creating, we will do well.”
Golden catchment opportunities
Key factors that are expected to boost trading include the 61,000 people working in Watford, including at TK Maxx’s headquarters, as well as an affluent shopping population, West Herts College’s student population and easy access to London.
The centre is also making a play for the tourists visiting the Warner Bros’ Harry Potter studio tour nearby.
Additionally, the extension forms part of plans to tap new markets. Recent signings from aspirational occupiers such as contemporary bar venue The Florist are crucial to intu’s strategy to reel in more affluent shoppers from key catchment areas.
“Our research shows that having a wider retail and leisure offering means we could reach North Hertfordshire, Buckinghamshire and the Home Counties circle. The bigger the collection of amenities on offer, the further afield people will travel to shop,” Ryman says.
“Anything within the M25 is always densely populated, but the area between the M40 and the M1 motorways is a wealthy corridor we want to tap into.”
The centre’s increase in flagships and a second department store, adding to its existing John Lewis shop, is expected to boost Watford into CACI’s top 20 national retail destinations.
This will place the town centre alongside regional cities such as Edinburgh and Bristol, up from its current ranking at “around 40”.
A long-awaited launch
The launch will mark the completion of a long-overdue revamp. New double-height units in the extension will enable occupiers in its existing line-up to relocate and upsize, while added entry points are expected to bolster annual footfall by 20%.
It will also bring in longer trading hours, which will extend to 9.30pm from its current format of 6pm on weekdays and late-night shopping on Thursdays.
Ryman says: “It was very important for us to bring in catering and leisure – the town needed that – and the demand was certainly there for that. Most people in Watford have to travel out-of-town or to a retail park for leisure experiences.
“It also allows us to introduce longer trading hours, which is important as people are looking for convenience, and choice; a lot of people want to shop in the evenings after work. There were lots of different drivers that gave us the confidence that this was the right thing for us to do.”
Intu Watford’s heightened focus on investing in both its fashion retail and catering amenities might appear to be a brave move, given the current market sentiment towards both sectors.
However, its proximity to affluent catchment areas and lack of local competition stand it in good stead to counter the decline in both casual dining and bricks-and-mortar shopping.
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