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The UK May Never Build A New Shopping Centre Again

That’s it. It’s over.

It might be the St James Quarter in Edinburgh. Or it could be the renovated turbine halls at the redevelopment of Battersea Power Station in London. Either way, depending on your definition, one of these may well be the last new shopping centre ever built in Britain. 

The era of shopping centre development in Britain, which dawned with the 1964 opening of the Bull Ring Centre in Birmingham, lasted just shy of 60 years. Data from Colliers shows that, after St James Quarter, which opened in June this year, and Battersea’s roughly 500K SF shopping mall (not a pure shopping centre as it's part of a wider mixed-use scheme), due to open next year, there are no new shopping centre developments planned in the UK. Nada. 

The St James Quarter in Edinburgh

The centrepiece of Colliers’ Midsummer Retail report used to be the stats on the UK’s shopping centre development pipeline, but the firm told Bisnow it has stopped collating this data because there are no new projects planned. Major schemes that were in the works have seen the amount of retail whittled down to about 10% of the project’s size, with shops and restaurants replaced by offices and homes, like at Hammerson’s Martineau Galleries. Schemes like Hammerson and Unibail-Rodamco-Westfield’s plans for Croydon have been put on ice indefinitely, with planning consent now elapsed. 

Shopping centres as a retail concept have played an outsized role in British life for the past half-century or more, for decades drawing in shoppers and investment capital alike. But take a longer view of the history of retail, one spanning centuries not decades, and it becomes clear their dominance was a short anomaly in the way we buy the things we want. The infrastructure they created is in the process of being dismantled, and while shopping centres still have a place in the modern consumer economy, that place is undergoing something of a reversion to how retail worked for hundreds of years before their conception. 

A version of the shopping mall has existed for thousands of years, in the form of the agora of ancient Greece or the bazaars of the Middle East, where merchants would gather to sell and trade goods. But the shopping mall, particularly the indoor, covered mall, traces its history to the Southdale Centre, which opened in Edina, Minnesota, in 1956, setting the template for thousands of malls built in the U.S. in the following decades, and the hundreds of thousands around the world. 

The UK was an early and enthusiastic adopter of the concept, with the Bull Ring being conceived around the time the Southdale Centre opened, and the first out of town mall, Brent Cross in north London, opening in 1976.

Experts in the sector seem in agreement about whether another new shopping centre will ever be built in the UK.

“I think the short answer is no,” Visitor Insights Chief Executive Isabelle Hease said. The company uses data to advise retail owners and developers on maximising visitors to their schemes. 

“That kind of archetypal shopping centre, inward looking, indoors, anchored by department stores, had a limited shelf life in terms of success in the UK,” Hease said. “It works where it is a true destination, like the major Westfield schemes. But anything else is a no, and too many were designed not to be integrated with the towns where they were located.”

Simply put, the UK built too many identical centres, Colliers Head of Retail Development and Advisory Greg Styles said. The UK didn’t go quite as mad as the U.S. when it came to building shopping malls — it has about 2,900 SF of shopping centre space per 1,000 people, while the U.S. has 10 times as much, according to Cushman & Wakefield data. But that UK figure is still the fourth-highest globally, coming in behind Canada and Australia. 

Styles agreed that shopping centres, as they were conceived and built in the UK, were something of a short-lived departure from how retail traditionally worked. The first retail stores were an extension of the homes and offices of merchants, integrated into towns and cities. It wasn’t until cars became ubiquitous in the post-war years that shopping centres were moved out of town and started to face inward instead of outward.

Now we are heading back to the pre-shopping centre norm.

Ellandi's Isablle Hease

“We’ve got maybe 40% too much retail in this country and the shopping centre concept, as it evolved, was not fit for the purpose for our towns and cities,” he said. “From an urban planning perspective, these big blocks of real estate need to be designed so that they can last for 100 years, but over that period have five or six different uses.” 

There are some blindingly obvious reasons why no one is building new shopping centres any more, principally the shift of demand from bricks-and-mortar retail to online. But it is worth unpacking what that really means in terms of retail development.

St James Quarter in Edinburgh was built by fund manager Nuveen and Dutch pension fund APG. Nuveen Director of Retail Chris Pyne said the scheme was originally conceived in 2008, when the retail world was fundamentally different. At that point it seemed much easier to predict what consumers wanted from a scheme, who the likely tenants would be and how much they were likely to pay. For that reason, investors were willing to commit large amounts of capital to projects that typically take more than a decade to materialise. 

Today the speed of change in consumer demands has thrown those certainties into doubt. The REITs, institutions and banks that would typically develop and fund new centres are no longer in the game. Nor are the tenants, and the way that rent is paid makes it much harder to underwrite the income that a centre might produce. 

“We’ve got about 100 units, which is a lot smaller than a lot of the schemes that were built 10 or 15 years ago,” Pyne said. “Are there 200 operators out there who are active in the market?”

In particular the big department stores that would have anchored a centre and been given deals on low rents to bring in shoppers are now no longer a draw, if they still exist at all, Pyne said. 

“The leasing structure has gone from a standard lease of 15-20 years, to full turnover leases, and now we’ve come out of the other end with something of a hybrid. You have to be agile enough to do that.”

There are benefits in clustering retailers together, in particular retailers of a similar ilk, which can make shopping centres attractive.

“I think I am one of those people that has been guilty of advocating that you have to fully integrate every type of service in a town together, almost to the point of never having two retailers next to each other,” Visitor Insight’s Hease said. She pointed out that it helps retailers to have a critical mass of stores to draw shoppers in, and shopping centres can provide that. And putting similar retailers next to each other can have an agglomeration effect, as shoppers know where they need to go to find what they are looking for. 

Southdale Mall in Edina, Minnesota, the first modern indoor shopping mall.

But consumers today are increasingly looking for a different experience from shopping, something that shopping centres can be ill-equipped to provide. 

"The size of a scheme doesn’t matter any more as far as the consumer is concerned, it’s about relevance,” Chris Igwe International President and founder Chris Igwe said. Igwe is a former European property director of Foot Locker and Gap, and now advises retail brands on their store needs. 

“For brands, they are getting far more granular, they want to connect with the local consumer in a particular location, rather than having the same offering in London, Paris, New York and Beijing,” he said.

Igwe pointed to Foot Locker, which has opened a store in Brixton in south London, where the store fit-out utilises local artists and hires staff from the local area to better serve the local community. 

Shopping centres can create such a connection with the local area, Igwe said, but not if they have been built as inward-looking fortresses that don't interact with the surrounding area, and not if the owners have just filled them with large chain brands. 

Visitor Insight’s Hease pointed out that in the battle to repurpose centres and introduce new uses, like offices or health centres, indoor malls will have a harder time, because it is more difficult to physically open them to the wider community. 

The Southdale Centre in Minnesota was designed by an architect called Victor Gruen, who emigrated from Vienna, Austria, to New York in 1938 fleeing the Nazi persecution of Jews in his home country. 

In a 2004 essay for the New Yorker, Malcolm Gladwell wrote that Gruen envisaged Southdale as part of a much wider development surrounded by homes, offices, schools and community centres, a re-creation of a carefully planned and idealised version of a city centre that would avoid what he saw as the failings of unplanned urban districts. 

But it never came to pass — the rise of cars and government tax breaks made it so lucrative to build suburban shopping malls that there was no need to integrate them into a wider urban context. 

By 1978, Gruen came to despise the concept he had created, isolated malls surrounded by car parks. The man who created them grew to believe shopping centres as they had come to be built were poor uses of space, ugly and the antithesis of his vision of shopping as the center of a vibrant community. Forty years later, others are coming to the same conclusion.