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Can Birmingham's £4B Retail Sector Learn To Live Without Department Stores?

The closure of 31 House of Fraser stores including outlets in Birmingham and Wolverhampton has now been followed by another profits warning from  Debenhams, the third this year.

Are the days of the department store over, and how will 1.5M SF of new Birmingham retail floorspace be anchored without them?

As new data reveals for the first time the true size of the Birmingham retail sector, Bisnow found out.

House of Fraser, Corporation Street, Birmingham

With a long list of High Street retailers in distress, or facing closure, you might guess that Birmingham's retail spending was about to slide. But think again.

Birmingham will see the largest increase in retail spend in the U.K. to 2025 on the back of ambitious development. The city’s £4.14B retail spend will grow by just more than 2.5%, adding another £105M a year in spend within the next seven years, thanks to 1.5M SF of new retail floorspace.

In Coventry a £1.6B retail spend is due to grow by another £49M as up to 1M SF of new retail floorspace is developed.

These are amongst the findings of research by retail specialist Harper Dennis Hobbs. Its U.K. Retail 2025 report unearths the winners and losers of changing retail demand.

The HDH report uses gravity modelling to define retail catchments and spend. By comparing weighted spend in 2018 it forecasts spend for 2025.

New developments such as the 100K SF Martineau Galleries are set to provide a major boost to Birmingham’s retail market and HDH predicts the city will see the largest increase in spend, with a projected 2.54% increase between 2018 and 2025.

But according to HDH new retail floorspace will need new thinking. In particular, the days when a department store could anchor a new retail development — perhaps taking half the floorspace — are now over. The latest warnings from Debenhams, and the trauma which sees House of Fraser close 31 stores including their outlets in Birmingham's Corporation Street and in Wolverhampton, simply crystalise a longer-term trend, it said.

Developing Without Department Stores

The iconic Selfridges department store at Birmingham Bullring

Two department stores — the 250K SF John Lewis, opening in 2015, and the original 160K SF Selfridges dating from 2003 — underpinned the retail regeneration of Birmingham over the last two decades. But the future will be different, HDH claims.

“The whole idea of department stores anchoring retail developments is now questionable,” HDH Director Jonathan De Mello said. “Retail will not be sustainable without more leisure, more food and beverage offers, perhaps more residential — and the idea that you can have half the floorspace occupied by a department store is just not going to work any more.”

De Mello suggested the answer is a mix of larger floorspace users — but also a rethink of what new retail space in Birmingham and Coventry is meant to achieve.

“You could create a cluster of major space users — a Next, a Primark, a TK Maxx, Zara, H&M, all of them paying a reasonable rent, unlike the old 150K SF department stores, and it could mean better income for landlords and a better shopping experience for shoppers, because people don’t necessarily want that all-in-one-place department store experience,” de Mello said.

Developers need to re-think who their occupiers are, and where their income comes from, and to think about this long-term.

“The new Birmingham and Coventry developments are going to be trials leading the way for a new style of shopping centre without department stores, stores they do not need if they can attract viable alternatives.”

De Mello suspects that more food and beverage floorspace will be the answer, but there could be other options.

“Generally we need less retail floorspace, but a better mix of new residential and new retail floorspace could work, and where you have fast population growth you can absorb new retail floorspace. But this needs to be carefully thought out — balancing on the one hand shrinking retail real estate portfolios, and on the other the fact that many Midlands high streets are not configured for modern retailing. The conclusion would be that new retail would work if it was pitched correctly,” de Mello said.

Warning: There Will Be Losers

Beatties, the soon-to-be-closed House of Fraser store in Wolverhampton

However, the addition of significant new floorspace across Birmingham will draw shopper spend from neighbouring cities. HDH say that Wolverhampton for instance will see spend drop by 0.9%, not only because of what is happening in Birmingham but also due to the completion of the Mill Green Designer Outlet in nearby Cannock.

 “Whilst new retail development will benefit many U.K. centres, surrounding secondary locations will be negatively impacted and need to be proactive in becoming more competitive. Retailers and investors need to use this type of detailed research for effective future planning,” de Mello said.

“Birmingham’s gain will mean a loss of market share for smaller locations like Dudley, because there’s not much evidence of net growth in consumer spending. Any new development cannot help impact on retail spending in neighbouring locations.”

A department store-free future for new Midlands shopping centres poses challenges — and opportunities — in the coming decade for Birmingham and Coventry. But for some other Midlands locations, the upside is harder to spot.