EC Harris urges Government to rethink planning

[December 2009]

The planning system isn’t supporting distinct consumer trends or economic prosperity, according to built asset consultancy, EC Harris. One of the biggest barriers to a retail development pipeline which is aligned to consumer preference is the emerging planning policy. 

The current Consultation Paper on the proposed Planning Policy Statement 4 (PPS4) by Communities and Local Government sets out a framework considered by many developers and retailers as being unduly restrictive to edge of town / out-of-town development, favouring the protection of the high street.

The potential of an additional ‘competition test’ arising from the findings of an October 2009 report from the Competition Commission, will further damage the expansion potential for some food and grocery retailers with existing presence in a town looking to complement their offer with different formats on edge of town / out-of-town.

Mark Farmer, Partner at EC Harris commented; “The public sector has to take charge of land assembly, infrastructure and provide a de-risked planning system if the major town centre retail developments that they are promoting have any future. The divergence between consumer and retailer requirements and emerging planning policy has the potential to be a ticking time bomb in relation to deliverable and fundable retail led regeneration.”

According to forecasts by EC Harris and retail analysts Verdict Research, these restrictions to out-of-town retailing do not align with distinct consumer demand trends.

Table 1

Source: Verdict Research

Malcolm Pinkerton, Senior Analyst at Verdict commented; “Town centres are diminishing in significance as consumer spending habits change, with out-of-town emerging as the biggest benefactor. The main catalyst here is the ongoing growth of the supermarkets and improved tenant mix out-of-town, which is continuously drawing more spend away from the high street.”

Out-of-Town

Although out-of-town retail parks have been hit hard by the recession due to the struggling home-related sector, vacancies left by high profile failures are creating opportunities for others to expand. Forecasts show out-of-town retailing is set to grow its share of total retail spend over the next five years due to the presence of grocers and other non-discretionary retailers as well as an increase in ‘click and collect’ fulfilment of online orders.

The big four grocers continue to extend their dominance of the out-of-town market, with grocery accounting for 70.9% of all out-of-town sales in 2009, according to the forecasts. For the non-food retailers out-of-town, capitalising on the success of the grocers and exploiting their robust footfall will be vital.

Retailers such as Mothercare and TK Maxx benefit from consumer loyalty which encourages the consumer to travel out-of-town. Those looking to expand such as HomeSense and John Lewis are also attracted to the out-of-town benefits such as the current appealing property deals.  

Neighbourhood

Neighbourhood retailing will be impacted by a change in consumer shopping habits due to the growth of convenience. The neighbourhood market is set to out-perform total retail in 2009 due to the success and subsequent expansion of both Tesco and Sainsbury’s. However forecasts show space growth will decline by -0.9% by 2013 due to potential saturation and consolidation.  

This is likely to force out a number of weaker players in the market, and may reduce the size and influence of some symbol groups like Spar and Londis. Therefore the balance of power in this market may shift even further to the larger grocers and symbol groups - should enough independents exit the market.

Town centres

Town centres will be impacted the most over the next five years with the recession accelerating negative long-term trends. The contraction in consumer town centre spending and the reluctant shakeout to remove excess capacity across a number of sectors is changing the face of high street retailing. As the largest, most mature location and one that is also being squeezed by the transfer of spend to competing channels such as online, the town centre is shrinking the fastest.

Catherine Tobiasinsky, Partner and Head of Retail at EC Harris explained; “Retailers know what size and format works for them but pre existing formats on the high street don’t always deliver their ideal models. There is a push on landlords to reconfigure space, however to get the proportions retailers want, they are looking to out-of-town where there are more options for opportunity and innovation adding to the downfall of town centres.”

Despite the marked decline in discretionary demand, the three significant new retail developments of 2008, Westfield London, Cabot Circus Bristol and Liverpool One have all performed solidly.  Developments in prime retail locations are in demand however due to lack of finance and uncertainty, current developments such as Trinity Walk in Wakefield, which is in administration and Summer Row, Wolverhampton currently mothballed, reflect the greater degree of caution with provincial locations.

It is secondary space however that is bearing the brunt. Retailers are closing stores in these less appealing locations in favour of relocating to the attractive deals currently on offer in prime new centres like Union Square in Aberdeen’s generous rent-free deals.

The opening of major new centres can have a ‘sponge effect’, causing nearby shopping areas to suffer as footfall is transferred to the new exciting space.  The amount of towns becoming obsolete in this way is a long-term trend and one that is set to continue. Research conducted by the British Council of Shopping Centres shows 50% of all shopping centre development in 2008 was in the nine largest UK metropolitan cities – confirming a polarisation to primary space.

Malcolm Pinkerton added; “New, prime, shopping space, is continuing to do well, but consumers have reduced spending overall and are channelling more online, leaving less available to older, less attractive high streets, compounding the problem of secondary space, with town centres particularly badly hit.”

Development change

Retailers’ format and size requirements are changing quicker than development pipelines are able to react; this is leading to developers being reactive.  New development delivery models are needed to enable appropriately located retail asset growth at a sufficient pace.

Mark Farmer concluded; “As long as retailers want to preserve cash for core business, they face an inability to deliver expansion or relocation plans without third parties. A collaborative model with funds and development expertise aligning to specific retailers not just asset class could be a solution.” 

- Ends-

Notes to Editors

About EC Harris

EC Harris is an International Built Asset Consultancy - acting as trusted advisors to clients - in planning and executing strategies that optimise the construction, operation, use and ownership of built assets.  The firm has 46 wholly owned offices in 24 countries employing 3,400 people.  Turnover in 2008/09 was £306m.

About Verdict

Verdict Research is the leading authority on retailing. The firm has privileged access, at the highest level, to key executives working within the top 200 retailers. Its research and publications provide executives working in a wide range of business sectors - retailing, manufacturing, advertising, marketing, professional services, property, finance and the media - with unrivalled independent analysis of the retail sectors, key trends driving each, insight into the major players and forecasts. Verdict Research, is a wholly owned subsidiary of Datamonitor.