Swift government action is required to address the commercial and physical deterioration of town and city centers across the U.K., according to CEOs and senior executives from some of the U.K.'s largest real estate companies.
Speaking at a Feb. 2 conference in London hosted by the British Property Federation, the CEOs of British Land Co. Plc, Grainger Plc and Grosvenor Britain & Ireland, along with Hammerson Plc's managing director for the U.K. and Ireland, decried the condition of many of the U.K.'s town centers, which are the traditional cores of retail and civic life in British municipalities.
Many town centers in the U.K. have experienced gradual declines in recent years as factors such as the impact of e-commerce and, in some cases, competition from large shopping centers reduce footfall.
"[A] fundamental shift, particularly in smaller towns and cities, is going to have to occur if we're not going to have a horrible, horrible social problem over time," said Chris Grigg, CEO of British Land, which has a portfolio of retail and office properties across the U.K. valued at £13.5 billion, according to S&P Global Market Intelligence data.
Grigg argued that one of the main obstacles to reinvigorating Main Street U.K. is that single buildings often have multiple owners, making large-scale redevelopment that much more difficult. "One thing that's clearly critical is one way or another getting sufficient areas of single ownership. ... I think that [requires] government intervention of some [kind] because it's just very, very hard to do otherwise."
Craig McWilliam, CEO of Grosvenor Britain & Ireland, which has £5.1 billion of property assets under management, said the scale of the problem meant that some town and city centers were likely beyond redemption. "If local secondary centers are going to be at all effective, they're going to have to be smaller, and they're going to have to be better led," he said. "It is going to be a real challenge, and I think a lot of these centers will not make it because they don't have the political leadership, and they don't have the community who'll consolidate to adopt it."
The warnings come amid a run of negative headlines for U.K. retailers. In the latest hit for U.K.'s high streets, one of the country's largest retailers, Marks & Spencers, announced Jan. 31 that it is to close 14 stores, with another eight closures proposed, following a disappointing 2017 Christmas period. A survey by insolvency advisory company Begbies Traynor published in December 2017 found that 45,000 U.K. retailers were in "significant financial distress."
Helen Gordon, CEO of residential landlord Grainger, which has a portfolio valued at £2.84 billion, according to S&P Global Market Intelligence data, said new uses for town- and city-center real estate need to be considered. "I would like to see more of our town centers accommodating more residential, and if it needs local authorities to put together sites to enable that to happen, then that's probably a good thing to do," she said.
Mark Bourgeois, managing director for the U.K. and Ireland at retail real estate investment trust Hammerson, which owns and operates almost £5 billion worth of property in the U.K., supported Gordon's suggestion. "That's the future for these places and we need some bold vision and some real acknowledgement by local authorities that these places don't need to be retail anymore. I think we can really drive the point that Helen's making and see more residential absorbing that space."
