The Great London Shopping Centre Conversion Is Here
The need to convert excess retail space in London’s shopping centres to other uses has been talked about for several years. As 2021 gets underway, the talk is starting to become a reality.
Several owners of shopping centres in London and its environs have submitted plans to undertake major redevelopments to convert space to new uses or build on top of or around existing malls, with a big focus on residential.
They include long-term owners and new investors who bought in as a result of redevelopment opportunities: Crosstree Real Estate, Capital & Regional, Long Harbour, Ballymore and Areli Real Estate are among the investors at various stages of the process.
Making it work in practice takes deep pockets, vision and an understanding of what people will want from their urban centres in future. The schemes are complex — unlike an office redevelopment, it is often not possible to knock down the entirety of existing shopping centres and start afresh, so developers need to balance existing uses with new elements. But success means taking space that is becoming obsolete and bringing it back to profitable life.
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Crosstree bought the Edmonton Green shopping centre in north London in 2018 for £72M and held it for two years as a strong investment as-is, but it has had redevelopment on its mind since the beginning.
“We were attracted by the rarity of a 26 acre site in London encompassing the entirety of the town centre.” Crosstree Partner Will Dear told Bisnow of the firm’s decision to buy the Edmonton Green shopping centre in north London in 2018 for £72M.
“The scheme was let off low rents which have proven sustainable and oriented towards grocery and convenience. This also presented an opportunity to work with a constructive local authority to masterplan the town centre as well as near term redevelopment potential from several large surface level car parks. We were excited by the opportunity across both the existing scheme and the future masterplan.”
Crosstree submitted plans in January to undertake a major redevelopment of the site, which currently includes a 440K SF shopping centre, a daily market, a leisure centre, a 1,000-space car park, 50K SF of offices, and a library and other community uses.
The new scheme will total 2.7M SF, of which 1.6M SF will be residential, comprising up to 1,500 units. The scheme will be redeveloped in phases, with the first residential phase comprising 353 build-to-rent units. The market and leisure centre will be retained, as will a yet-to-be specified amount of retail.
“There’s a lot of talk about the 15-minute city at the moment, and the scheme benefits from a large catchment, so if you can get the offering right you can appeal to a lot of people,” Crosstree Partner and Development Director Matt Mason added “We asked locals what they liked and disliked about the existing scheme, and found that they wanted more local shops that serve the community and a night-time economy. We’re addressing this both in our ongoing investment in the current scheme and as part of our ambitions for the phased masterplan.”
In terms of the technical elements of adding significant new buildings to the site, Dear said the scheme has an oversupply of surface-level parking, which is easier to build on than adding space on top of a shopping centre.
Crosstree joins the ranks of many big-name London developers doing retail-to-residential redevelopment. As is so often the case, Jamie Ritblat’s Delancey blazed a trail when it came to executing this strategy in London. In 2013 it bought the Elephant & Castle shopping centre in south London with a view to using it as a development site for the creation of close to 1,000 rental apartments alongside a new retail centre. Planning was delayed several times but consent was achieved in 2018. Construction of a new shopping centre did not start until October last year, but the first phase of new apartments are built and occupied.
Capital & Regional has teamed up with Long Harbour to redevelop the 250K SF Mall shopping centre in Walthamstow, north east London, with nearly 500 rental flats to be added in a £200M scheme.
Criterion Capital earlier this year began consultation with local residents about the conversion of the Dalston Kingsland shopping centre in Hackney, east London, to a new mixed-use scheme, likely to have a significant private-rented residential element.
And in north London, residential specialist Ballymore bought the 188K SF Broadwalk centre in Edgware for £75M from Aberdeen Standard for £75M in June. It has not unveiled plans for the scheme yet, but the previous owner had explored options to build up to 3,500 new homes on the site, with excess parking space again a key appeal — up to 1,000 homes could be built on the centre’s car park.
Slightly further out, Areli is undertaking two shopping centre redevelopment projects, one in Maidenhead to the west of London, and one in Orpington to the south east.
Areli chief executive Rob Tincknell told Bisnow that using data to get a detailed understanding of what a town lacks is crucial to making new schemes a success.
“In Maidenhead, there is a demand for offices; in Orpington it is a slightly older demographic so there is more demand for senior living,” he said. “But it is not about just one use, it is about finding the right balance of uses together, to bring these town centres back to life.”
In Maidenhead, Areli has teamed up with French investor Tikehau Capital to invest more than £400M redeveloping the Nicholsons shopping centre, bought out of receivership in 2018, into a new scheme comprising retail, leisure, community uses, offices and 650 apartments.
Tincknell said that uses like residential, retail and offices could complement each other — homes and offices provide the footfall to support retail and restaurants, and a lively, well-thought-out mix of shops and places to eat and spend leisure time made people want to live and work in a place.
Open schemes that essentially form a town centre are easier to repurpose than closed shopping centres, where the existing architecture makes them difficult to amend, several developers pointed out to Bisnow. But they come with their own complexities.
“The town centre is the one place that everyone goes, people are attached to it, so it has to be the best,” Tincknell said. “The best open spaces, the best materials, architecture, management, environment, everything.”
One thing is for sure — retail is no longer where most of the value lies in these schemes.
“The key income driver is what is happening above the retail, the residential and office space,” Tincknell said. “If you came up with a new 400K SF retail scheme with some small apartments on top, that wouldn’t get funded. But 400K SF of residential with a good retail mix below that is ancillary to that, then there is interest.”
But for the owners looking to redevelop schemes, it is not just about building new types of space, it is about managing it as well, a fact that influences how redevelopments are designed.
That is especially the case when it comes to BTR, which, as the examples of Crosstree in Edmonton Green and Capital & Regional in Walthamstow show, is likely to play a major part in the future of London shopping centres.
“Bringing together BTR and shopping centres is great for the local economy in that it creates a boost for jobs and spending and creates a real buzz,” Way of Life Managing Director Sowgol Zarinchang told Bisnow. Way of Life is the BTR management arm of Long Harbour, which is building and will own the BTR element of the Walthamstow scheme.
She said combining residential with commercial space creates design and management issues that need to be addressed. There should ideally be more than one route to the residential entrance to ensure resident safety. If the residential and commercial elements share a car park, residents should be able to access it without having to pay. Security must be managed at events that might be curated for BTR residents. There are many facets that must be managed to make residents and shoppers alike feel comfortable and welcome.
“But done well it is a way of creating good quality new homes, and from an investor point of view, it mitigates the risk by providing a new source of income,” Zarinchang said.