On a mission to revive the retail sector

James Merrick from Johnson Fellows, Birmingham-based chartered surveyors, discusses the threats and opportunities affecting the West Midlands retail sector.

As retail specialists, Johnson Fellows has experienced all sides of the recession through its clients.

Whether seeking advice on rates, attempting to negotiate lower rents and cut costs, or the smaller, independent retailers looking to expand their business through the agency’s acquisition services, the Birmingham-based chartered surveyors have seen it all.

James Merrick, equity partner at Johnson Fellows, said: “Following the recent news that mother and baby fashion retailer Mothercare will close 111 of its branches over the next three years, and the troubles announced this month (May) by Clinton Cards, the demise of the high street looks set to continue unless there is a drastic change.

“While Birmingham City Centre appears to be fairing well, local towns such as Wolverhampton and Walsall have been hit hard by the departure of major retailers.”

In March, Wolverhampton ranked within the top 10 list of voids in the UK, with approximately 35% of shops in the town centre being empty. Walsall is also suffering from high void rates as the retail focus shifts from the Old Square shopping centre to the Crown Wharf Retail Park, at the north end of the town. Both towns are struggling to retain retailers and increase footfall, but they hope that Mary Portas’ initiative – Pilot Towns – will come to the rescue.

James said: “The Pilot Town Initiative – which will see 12 towns receive a share of £1.2million to help turn around their high streets – has received a huge response of 371 bids. This just goes to show how many of the UK’s high streets are in decline and, although Mary Portas and the government have pledged to select an additional 12 towns to receive a cash boost, it’s clear that they can’t help everyone. Therefore, it’s up to the towns themselves to form their own committees – comprising retailers, landlords, shopping centre managers, and even local residents – to turn things around.”

To enter the draw for the Pilot Town initiative, each town had to come up with their own ideas on how to improve their local high street. If either of the Black Country towns are successful, night markets and a loyalty card scheme could be introduced in Walsall, while Wolverhampton would enhance its student culture by running a Dragon’s Den-style competition – Wolf’s Lair – to support young entrepreneurs with a start-up business. It would also bring the high street to life with modern-day town criers, street artists, musical theatre and storytellers.

James said: “The high street used to be a place where you could find all the services you needed. For example; a bank, library, small supermarket, card/gift shops, clothing retailers – all in one place. However, town centres are now being over-run with charity shops, discount retailers, betting shops and pawnbrokers so people don’t need or want to visit them as often.

“Retail landlords need to diversify and consider utilizing upper floors of shops, which are often unused. As well as generating extra income for landlords, it could potentially add to footfall for the retailers with a greater number of mixed uses on the high street.

“The popularity of online shopping has also been blamed for the demise of the high street. However, while some people do prefer to order items from the comfort of their own home, others still like the experience of purchasing goods from shops. They may search online for the best deal but a large majority of people prefer to visit a store, seek advice from a store assistant and walk away with the product in their hand.”

For a high street or town centre to be a popular shopping destination it needs to have some top retail brands. But, what are retail landlords prepared to do to secure the big names?

“The balance of power between landlords and retail tenants has definitely shifted during the recession. Where landlords were once able to charge substantial rents, a number of our national retailers are now in a position to name their price as landlords are eager to retain or secure high profile tenants. Major brands can often help landlords to fill neighboring vacant units as their occupancy implies that the shopping centre or high street is worth moving into.”

James thinks that retail landlords and tenants need to become more collaborative to ensure that they can support each other through the tough times. Landlords need to be more realistic about rents and offer incentives such as rent free periods or monthly payment options to help retailers manage their cash flow.

“Retailers can no longer afford to pay large lump sums of rent on a quarterly basis. Monthly rent payments are becoming more acceptable as landlords and tenants work together to ride the recession. By maintaining their cash flow, retailers are able to operate with greater financial fluidity rather than accruing for a quarterly hit that all but wipes out the cash flow in the business. It’s a win, win situation for landlords too as they don’t want to pay business rates on empty units or have the hassle of finding new tenants.”

In recent times, shopping has become more of a leisure activity with people combining an afternoon of retail therapy with a catch up with friends in a coffee shop. Birmingham city centre has embraced this lifestyle within its plans for the multi-million pound development at New Street train station.

The development, which is due to be completed by 2015, will see the existing station transformed into a 21^st century transport hub to cater for more than 140,000 daily rail travellers as well as the expected rise in shoppers travelling from across the UK. A 250,000 sq ft, four storey John Lewis department store will be a welcome addition to the redeveloped station. The new department store, alongside an upgraded Pallasades, will create an exciting new retail offering in the heart of the city.

James added: “The Bullring has been a big pull for retailers and shoppers to Birmingham but, by securing a huge retail anchor such as John Lewis at New Street, it will put the city on a par with London and Liverpool as a ‘must visit’ shopping destination that has excellent transport links. The size of the project is huge but it will be worth it to ensure that Birmingham remains a leisure destination that welcomes new visitors from far and wide.”