Retail-Led Regeneration

RETAIL-LED REGENERATION

We have all seen the transformational effect of good quality retail development in reviving the fortunes of depressed town centres. Westfield in London’s Shepherds Bush took has revived the fortunes of a lacklustre suburb, bringing increased jobs opportunities and prosperity. The Birmingham’s new Bullring Centre broke with the 1960’s sterile acres of windswept concrete to revive the city centre.

But such developments have relied heavily on the private sector seizing an opportunity to concentrate quality retail development to transform run-down estate. Planners and the government have been quick to spot the economic and social benefits and have insisted that retail centres are accompanied by transport links, green spaces, community centres and even schools — all paid for by developers through section 106 agreements.

But the bubble has burst and, as the worst economic downturn in memory impacts, developers’ pockets are no longer quite so deep. In fact, the British Council of Shopping Centres (BCSC), the body which represents all of the big names in the retail property industry in high street, shopping centre and out-of-town retail parks, warns that retail-led regeneration could be a thing of the past unless the government steps in to support developers and retailers.

An influential report entitled ‘Retail led Regeneration’, written by DTZ Consulting and commissioned by the British Council of Shopping Centres (BCSC) and a partner organisation Business in the Community, considers the threats and the opportunities in regenerating Britain’s town and city centres. BCSC’ Executive Director Edward Cooke says, “More government or public-sector help is needed because shopping centre schemes will stall if the economics fails to stack up. Realistically, only schemes with a public-led investment that are both commercially viable and capable of delivering measurable public benefits will get off the ground.”

The major shopping-centre-led projects that have revived town and city centres are not yet doomed. But they are certainly endangered. BCSC’s report sets out some of the wider social impact of regeneration. The premise is that retail-led regeneration provides opportunities to invest in infrastructure, transport, affordable housing and great community spaces. Cooke says, “When done properly regeneration works to everyone’s benefit.”

Seven case studies were highlighted by the report as examples of best practice: Byron Place and Dalton Park in East Durham; Glasgow Fort; The Centre Feltham; and the Bullring, Mailbox and Castle Vale in Birmingham. Georgia Siora, a Director of DTZ Consulting and one of the report’s authors says, “The future of retail-led development is uncertain at the moment. What is certain is we cannot sustain local and regional economic development without retail-led schemes.”

Siora points to a retail development in the Liverpool suburb of Litherland where, as part of a retail-led development, a Tesco supermarket is looking to hire 280–300 staff, around half of which will be drawn from the long-term unemployed.

Tesco is working in partnership with JobCentre Plus and the local council Sefton. Siora says, “Tesco is signed up to the government's Local Employment Partnership scheme, launched two years ago to help the long-term unemployed. Retail-led regeneration can be a catalyst for turning round areas of urban deprivation.” Other companies that participate include Travelodge, Asda, RBS and HSBC.

The latest figures from the Office for National Statistics suggest that 22.8 per cent of jobless people have been out of work for more than 12 months. Siora says, “Job creation in the retail sector has been overlooked in the past but even though the jobs are not high wage they can still have a significant impact on reviving the fortunes of an area.”

Job creation is not the only by-product to be derived from urban development. The case studies cited in the BCSC’ report bring together a range of social and economic impacts. The 45 retail schemes and case studies reviewed in the report were judged to have made a difference on the basis of how many positive consequences the scheme delivered.

Positive consequences or ‘impact factors’ include jobs and training, support for local small businesses, improved public transport links and an improved built environment as well as better social cohesion, health and quality of life and civic pride.

In every case successful regeneration creates a virtuous circle by creating new jobs, bringing visitors in to an area and sustaining improved community facilities and public infrastructure. A high concentration of quality retail stores boosted profits for the developer.

The corporate social responsibility organisation Business in the Community (BITC) was involved in the BCSC’ report, and its director of investment and physical regeneration, Bill Boler, acted as a consultant. According to Boler, the role of the developer in regenerating inner cities is underrated. He says, “We have learned from our members how much influence the private and retail sector plays in communities.”

Boler cites the example of BITC’s recent involvement in a large retail development in Oldham. He recalls, “There was 30–40 per cent unemployment and many long-term unemployed. In redeveloping a superstore and a high street, the developer raised overall confidence in the area that encouraged the council to build housing and a health centre. The whole development gave the council an asset in the long term.”

BITC’s experience in helping corporate members invest in corporate social responsibility (CSR) and job creation can be a useful asset in bringing public and private partners together to leverage benefits from retail-led development. Boler explains, “We’ve been working with BCSC to create employment in communities. We can help retailers and developers go beyond simply creating jobs that could be taken by incomers by showing them the underlying opportunities from developing schemes to help the long-term local unemployed. Skills can be found in the most unlikely places.”

Consulting with communities is essential, according to Siora, as is supporting local businesses. Successful developments are not imposed or parachuted into an area. The transformation has to come from within. She says, “Partnerships that bring together a wide range of public and private interests work best. Designers and planners of town centre schemes need to consult with key community organisations. The best retail-led schemes are those which reflect the demographic profile of the community.” If retail led this means having an anchor tenant that reflects the needs or the aspirations of the community. Siora says, “This could be a major Marks and Spencer store or, in other areas, Primark or TK Maxx.”

Equally, a retail development can be based around a new community facility such as a library or health centre so long as it will generate visitors who can be served by a wide range of large and small retail outlets and restaurants. But in a recession this kind of speculation requires a leap of faith. Siora says, “Confidence is contagious and at the moment that confidence is lacking. Developers and retailers need to know the likelihood of returns in the short, medium and long term. I don’t know whether the consumer economy will start to take off in six months or whether confidence will take longer.”

The underlying fragility of the recovery points to the need for government intervention, according to BCSC’s Edward Cooke. Job creation targets and projections for visitor numbers can easily turn out to be over ambitious, particularly in recessionary times, and more public investment is needed up front to pump prime development while benefits may take longer to realise.

Bradford town centre redevelopment by Land Securities is understood to have stalled just as building land has been assembled. And if it wasn’t for the Olympics, the new Stratford City shopping district in London’s East End would be dead in the water. The stakes are high.

At Stratford, well-established public and private partnerships are underpinning investment. The role of business is crucial. The East London Business Alliance (ELBA), a business regeneration partnership whose members include over a hundred businesses including many of the financial giants based in Canary Wharf, is engaged in giving small businesses a helping hand.

Alison White, Newham Programme Director at ELBA, believes Stratford City needs to be part of the legacy of the London 2012 Olympic Games. She says, “From my point of view the Olympic Games is just the tip of the iceberg. Small businesses are the engine of the East London economy and unless we can boost them there will be no legacy. This is reflected in what we are doing with local schools, colleges and universities to raise employability skills.”

Job creation linked to regeneration is all about raising aspirations. ELBA has been doing pioneering work with the University of East London on putting on summer schools for local pupils and raising aspirations of adults through outreach ‘learning shops’ in local shopping centres, offering careers advice. University staff explain how short courses can help people improve their skills and employability.

East London Business Alliance (ELBA), a business-funded regeneration agency, provides business mentors to local small businesses and start-ups. Alison White says, “Big companies at Canary Wharf not only share their expertise with small local companies but we also have a network where they are encouraged to source all of their services from local firms.”

BCSC’s Edward Cooke makes a strong case for government help. “A lot of retail-led regeneration is right on the edge of viability. We need to address those issues, particularly now that capital markets are drying up. If issues of funding are not resolved, we fear a development hiatus similar to that experienced in the last recession of the early 1990s when most new retail developments were scrapped or put on hold. We see a greater role for the public sector.”

BCSC has a shopping list of interventions it would like to see for the government.

Number one is tax-increment financing, an idea that has worked successfully in the USA and in the UK has been called accelerated development zones. In its 2008 autumn budget the government freed local authorities to raise money in capital markets through tax-increment funding schemes.

The idea is that benefits of regeneration can be costed in advance and that the uplift in land prices and property values will generate higher taxes in local business rates. All the local authority has to do is calculate how much extra tax revenue a development will generate and then borrow money from the private sector in anticipation.

Tax-increment financing is expected to be trialled in the UK soon, and the Parliamentary All-Party Committee on Urban Regeneration is looking at pilot schemes. At the same time, a working group, including the Homes and Communities Agency, the Communities and Local Government Department, the Treasury and developers is studying how the scheme would work.

BCSC has another line of attack and that is a call for greater flexibility over the index linking of business rates. The recent rate rise pegged to last year’s average retail price rises is, Cooke maintains, a mistake when currently deflation is in play and prices are falling rapidly. He comments, “Next year’s rate revaluation is likely to see retail rates rises of 16 per cent. As the body representing retail property we wouldn’t call for this revaluation to be put on hold, but we want a phased increase. Developers are only likely to invest if a scheme is viable and that depends on demand for space and high occupancy rates.”

At the end of the day, a retail-led regeneration will only succeed if it goes the extra mile. Says DTZ Consulting’s Siora, “The best retail developments go well beyond minimum standards both in terms of design and in the scope of job creation and other community benefits.”

As to details, Cooke is quite specific. BSCS would like to see a phased increase in property revaluation accompanied by transitional rate relief. He says, “We’d like to see at least the same transitional arrangements as were put in place in the last Quinquennial Review. And we’d like to see the reinstatement of empty-property rate relief — 100 per cent rebate for the first three months a shop is vacant and 50 per cent relief thereafter.”