Councils set to spend £1bn buying shopping centres by 2020

Local authorities are set to invest £1bn in shopping centres by 2020 to help ailing town centres, according to a new report.

The report by retail property trade body Revo and property and regeneration advisor Lambert Smith Hampton reveals that local authorities have invested over £770m in shopping centres since 2016, amid claims that could just be the ‘tip of the iceberg’.

It also shows that councils have accounted for 12% of all shopping centre investment by value since 2016, peaking at 16.7% in 2018.

According to the report, local authorities have invested billions in all commercial property over the last few years to mainly help generate income.

However, for many local authorities, the acquisition of shopping centres within their boroughs also been driven by the need to take more of a lead in the regeneration of failing assets and town centres, against a backdrop of falling rents and rising vacancy levels.

In April, Medway Council bought the Pentagon shopping centre in Chatham for £34.7m.

At the time, the council said that the purchase will generate an annual income of £1m which can be ploughed back to support council finances and allow it to play a bigger role in the regeneration of Chatham.

In January, North Somerset Council defended its decision to buy a shopping centre after retail giant Marks and Spencer announced its local store is earmarked for closure.

And in June last year, Bolton Council bought the Crompton Place shopping centre for £14.8m to help kickstart its town centre regeneration masterplan.

The report also includes a survey of 200 leaders and senior professionals from the regeneration sector.

More than two thirds (69%) of respondents said that public-private joint ventures are the preferred method of advancing town centre regeneration.

When asked to identify the top five challenges to town centres an overwhelming majority of respondents identified the growth of online shopping (70%), and high business rates (69%), underlining a frustration that taxation has not adapted to changes in consumer behaviour and where value is created.

Over 60% of respondents rated the increased provision of housing as ‘very important’ or ‘important’ to the future health of town centres.

Meanwhile, there was strong support for changes in planning policy, with more than a quarter (27%) believing that national and local planning policy should encourage ‘town centre first’ development, and 25% going as far as calling for an embargo on out of town development.

‘Our research shows that local authorities across the UK have become very active buyers of shopping centres as a means of taking back control and accelerating the regeneration of town centres,’ said Lambert Smith Hampton’s national head of planning, development and regeneration, Steve Norris.

‘With UK institutions and REITs (real estate investment trusts) set to further reduce their exposure to retail property, the public sector investment we have seen up to now may just be the tip of the iceberg,’ adds Mr Norris.

‘We are fully supportive of councils acquiring shopping centres as a catalyst for change, but only where they are underpinned by robust and fully costed business plans and investment strategies, as part of wider regeneration and income-generating objectives.

‘The survey results also underline that collaboration between the public and private sector is fundamental to reposition and repurpose towns and shopping centres to have a more dynamic mix of residential, commercial, leisure, civic, cultural and educational uses, alongside retail.’

The chief executive of Revo, Ed Cooke added:  ‘As an organisation which represents property owners, retailers and local authorities we are committed to bringing public and private sectors together to revitalise UK town centres.

‘However, we need further intervention from government to address the structural issues which are impacting retailers and other businesses, as well as the planning restrictions which make it difficult for the built environment to keep pace with shifts in consumer behaviour and lifestyles.’

Read the NewStart Feature on whether councils are gambling on their future buying shopping centres here.

Photo Credit – Openpics (Pixabay)