Councils are set to spend £1bn on buying shopping malls as they try to redevelop town centres depressed by a wave of store closures.
Local authorities have spent a record £775m buying shopping centres over the past three years, and are expected to outlay a further £230m next year according to research from shopping centre trade body Revo and property advisory firm Lambert Smith Hampton (LSH).
Steve Norris, head of planning, development and regeneration at LSH, said investment had surged since 2016 and the current levels could be just the “tip of the iceberg”.
“A lot of shopping centres are being bought for regeneration,” he said. “They might be failing assets in town centres where shop vacancies are high. Councils are going in to revitalise those sites, bringing in residential above or repurposing vacant units with something other than retail.”
One in five shopping centres that have changed hands since 2016 have been acquired by local authorities that have ramped up investment as private sector spending has dived by £1.85bn.
Financial investors have fled as more than 16 shops a day close their doors, squeezed out by the rise of online shopping and increased costs from business rates, wages and the fall in the value of the pound.
But low-cost funding available from the public works loan board has allowed councils to bid higher sums for property and enjoy better returns on investment than private funds.
There are concerns that councils are “dumb money” – paying over the odds for failing businesses. Shropshire council, for example, has been criticised for spending £51m on three shopping centres in Shrewsbury in 2018, all of which have since fallen in value.
But cash-strapped councils are not only motivated by generating income to replace money cut by central government, they also gain benefit from supporting communities and attracting new businesses and residents by redeveloping moribund retail schemes.
Shropshire council has argued, for example, that the short-term fall in value of its investment in the Darwin, Pride Hill and Riverside shopping centres is not a major concern. It gains annual income of £2.7m from the centres and is hoping to improve the attractiveness of the town by redeveloping at least one of the shopping centres with cinema screens, restaurants and a gym.
Norris said council buyouts could be a “catalyst for change” but only where they were “underpinned by robust and fully costed business plans and investment strategies”.
Successful schemes include Altrincham, where Trafford council invested in the town’s listed market hall, which was then revitalised as a fashionable dining space in partnership with a private investor, and Ashford, where the council has transformed the local Park Mall.
Woking borough council has helped to revive its town centre by acquiring the tatty Wolsey Place in 2010 and integrating it more closely with another nearby shopping centre and the high street.
Norris said redevelopment could take several years to complete and it was too early to judge the success of many schemes.
“Only a few local authorities have actually stepped into the market. But a number I speak to are in the process of developing strategies and looking at purchasing assets now,” he said.
Source: Source: The Guardian