“When you add on the smaller projects and infill schemes, that is a lot of development and we have not seen anything like that level of delivery in recent years,” says Colliers International’s head of retail agency London, Paul Souber.
Is that amount of development viable in the current climate? Agents and developers insist it is. The London consumer is still hungry for new brands and the boost in tourist numbers fuelled by the weak pound has given the market confidence to continue investing.
Colliers has added around 400 retailer requirements to its London tracker since the beginning of the year and new retail hubs within mixed-use regeneration projects are providing the type of environments that occupiers are now seeking.
The future of physical retailing is intrinsically linked to placemaking and integrating uses to create a vibrant destination.
Justin Taylor, Cushman & Wakefield’s head of retail EMEA, says: “Mixed-use development is such a strong formula in drawing people in.
“As long as developers get the offer and the mix right, they are a very appealing prospect to both retail and leisure operators.
A £400m joint development project by Cain Hoy and Sager Group, Islington Square (main picture) will incorporate 170,000 sq ft of retail and leisure with 263 homes, 108 serviced apartments and a theatre.
Due for completion in autumn 2018, the scheme is designed to lure occupiers with space at the heart of one of London’s most affluent boroughs. The 4.5-acre development sits on the site of the former North London Mail Centre and its Edwardian heritage is being carefully restored by CZWG Architects’ designs.
Its appeal has been further boosted by prelets to three anchors guaranteeing an all-day leisure offer. Third Space is to open a 47,000 sq ft gym, Odeon has signed for a six-screen cinema and Islington’s King’s Head Theatre will move into a new 250-seat auditorium.
The scheme is accessed by two new arcades opening out on to a tree-lined boulevard and it is hoped retailers will want to exploit its leisure draw and well-configured units that they might struggle to find on the existing retail pitch.
Neil Barber, Cain International’s leasing director, says: “We want to complement what is already a very strong retail and leisure pitch. Upper Street is home to some major brands, with zone A rents approaching £200 per sq ft. There are many retailers now struggling to find the right space and given that we are offering a whole range of units at 75%-80% of Islington’s headline rents, that is a very appealing proposition.”
Islington Square includes 35 restaurant and leisure units and Barber says around 70% of the space has already exchanged or is under offer.
“We are confident we will be 90% let by opening,” says Orme Retail director Peter Woods. “The residential units and leisure anchors are creating a sense of place and the type of mixed-use environment that retailers now get excited about. It is far from a standard shopping centre.”
He adds: “We are talking to a range of food and beverage operators, while the retailers range from upmarket cosmetic brands to homeware and mid to upper-end fashion.”
Barber says: “Letting anything at the moment is not easy, but retailers know shops trade well in Islington and they will be surrounded by successful brands.
“The first residents move in next year and when you combine the leisure offer with a strong events strategy, we are creating a place which should be buzzing from morning until night.”
Coal Drops Yard, King’s Cross
The transformation of King’s Cross will reach another milestone next year when Argent opens Coal Drops Yard, its £90m shopping quarter.
The developer is looking to exploit the character of the scheme’s industrial buildings to create a unique 100,000 sq ft retail and leisure hub.
Designed by Heatherwick Studio, Coal Drops Yard will breathe new life into a site that was constructed in the 1850s to handle coal following its journey from the North of England. The Victorian brick arches will house up to 65 units for fashion, craft and culture retailers.
Argent project manager Craig White says: “In answer to the question of whether London needs more retail, it doesn’t necessarily need more shops, but better-quality retail environments that are exciting and relevant to their local communities.”
For White, the priority is to attract “artisans and icons of design and fashion” and a year before opening, Argent has exchanged on or is in negotiations for around 65% of the floorspace.
The largest retailer to commit so far is British design brand Tom Dixon, which will move from its current home at Portobello Dock to create a 17,500 sq ft flagship store. Fashion retailers 18montrose, Cubitts and Lost Property of London have also signed up, taking around 6,800 sq ft of space between them.
Argent hopes the scheme’s distinct character will attract a mix of established and emerging retailers keen to benefit from the 20m people it estimates will visit the area each year.
In terms of food and beverage, the scheme will incorporate a restaurant, two cafés and a bar. White concedes the proportion of leisure is relatively low, but says there are plenty of food options available elsewhere in King’s Cross and many of the retailers will have in-store cafés.
In order to attract the right tenant mix, Argent spent three years working with brands to formulate its leasing and rental structure. The result is a base rent plus turnover model that White says offers retail space at half the rent of Soho. The formula helps share risk and occupiers are being offered flexible lease lengths that range from one to 10 years.
David Bannister, director at letting agent Nash Bond, says: “This is a long-term project and the fact that we are not pushing on rents from day one allows us to have some exciting concepts. There will be a mix of category-killer brands with new names out of Central Saint Martins. It will offer an experience that you simply can’t get anywhere else.”
Westfield London extension
If you want evidence of faith in the resilience of the London retail market, look no further than the £600m extension of Westfield in White City, W12.
On the back of robust demand from both domestic and international retailers, Westfield has committed to creating the largest shopping centre in Europe. When the 740,000 sq ft extension is completed in March, it will take the centre’s total gross lettable area to 2.6m sq ft.
It is expected to attract 39m visitors a year and build on annual retail sales of £1bn.
Westfield director of development Duncan Bower says: “We are very confident about the future of London retail and are encouraged by the level of demand. The scheme is letting up well in what is a difficult market.”
Apart from a 230,000 sq ft letting to John Lewis and 22,000 sq ft to Chinese fashion brand Urban Revivo, Westfield hasn’t named any other occupiers.
Bower says it is in negotiations for at least 80% of the space and hopes to announce a bumper list of lettings later this month.
John Lewis gained access to its anchor store in July and there are rumours of a deal with Primark. Bower remains tight-lipped, but says discussions are under way with other retailers.
“As many rationalise their portfolios, they are seeking bigger stores in the best locations and we have taken the opportunity to provide more large floorplate units which allow retailers to trade over two levels.”
Since Westfield opened its doors in 2008, the retail market has changed dramatically and Bower admits the need for a more experiential offer has also affected the scheme’s design, with phase two incorporating a greater proportion of F&B, leisure and open space.
That quest to integrate retail and leisure into a mixed-use offer has been made easier with the development of the surrounding area.
The White City Opportunity Area now supports a community of residential and commercial occupiers. Westfield has permission to build 1,500 residential units, and developments such as Stanhope’s Television Centre, Imperial College London and Berkeley Group’s St James will boost spending while creating a more appealing destination.
Richard Scott, director at Nash Bond, is part of Westfield’s leasing team and says the area’s vibrancy is appealing to a greater range of occupiers.
“We are now able to target occupiers who wouldn’t normally have stores in shopping centres,” he says. “Our Village area has attracted a number of premium brands and we hope the extension will draw in more of those.”