Despite some falls in Zone A* rents since the peaks of a decade ago, the regional retail sector has reached a healthy level and offers a strong mix of market towns, out-of-town shopping and an excellent city centre offer.
The most recent autumn Retail Market Review, published by Newcastle-based retail specialist @retail, focuses on all retail sub-sectors from Berwick to Teesside.
@retail partner Bob Fletcher says the region’s retail capital, Newcastle, is trading very strongly.
“The fact that Zara has committed to let the BHS store at the top of Northumberland Street to create a major, 35,000 sq ft, outlet in spring next year shows huge confidence in the location. This will be a massive pull for the city,” he says.
Elsewhere in the city centre, Monument Mall was sold by Hammerson to Standard Life for £75 million.
“The new owners lost no time in contracting Molton Brown to take the unit formerly occupied by Jolie Papier, the upmarket Clinton subsidiary. The rent is believed to equate to £220 Zone A** a record for this location, which features a number of high-end brands,” says Bob.
There is, however, a shortage of secondary space. The affordable retail opportunities in Grainger, Clayton, Nelson and Nun Streets are becoming increasingly important in filling this gap, as are “the spoke streets radiating off Northumberland Street – St Mary’s Place, Saville Row and Ridley Place, for example,” adds Bob.
He continues: “It is these streets that are becoming increasingly important in shaping the future of the retail core of the city centre and we are pleased to see that Newcastle City Centre and NE1 are formulating a strategy led by retail property guru Mark Williams, director, Acquisitions, Finance and Investor Relations at Hark, one of the UK’s leading retail asset managers, and chair of the Working Group to transform Northumberland Street.”
With the former Co-op building in Newgate Street brought back to life through ambitious refurbishment by Interserve, this large property between China Town and Eldon Square features Premier Inn, Turtle Bay, Zapp and Cabana, with a further large unit under offer to a major leisure attraction.
intu Properties’ Eldon Square continues to dominate the city with 70 per cent of Newcastle’s prime retailers located here, attracting 36 million visits each year. It comprises over 150 stores, covering 1.35m sq ft. Over £200m has been invested by intu over the last five years.
@retail says prime rents are pushing £310 Zone A. Bob comments: “The imminent opening of 20 restaurants in Grey’s Quarter shows how this scheme continues to evolve very successfully.”
Out-of-town retailing is dominated by Gateshead’s intu Metrocentre, where the statistics continue to be very impressive – two million sq ft; 21m annual footfall, 342 units, 9250 car parking spaces – all in all the largest shopping and leisure centre in Europe.
Acting for intu Properties, @retail reports a number of significant deals including New Look Men’s – at 7100 sq ft, the biggest store in the UK for them to date. Other lettings include Flannels, Pandora (two new stores), Carluccio’s, Cath Kidston, Supercuts and a new 20,000 sq ft store for Wilkos.
Elsewhere across the region there are well-performing market towns such as Yarm, Northallerton, Hexham and Morpeth, which fall into @retail’s category of affluent locations that are doing really well serving local catchments with a measure of tourist spend on top.
These towns are increasingly of interest to niche fashion multiples and attracting investment interest such as the recent Arch (the Northumberland development company) acquisition of Northumberland Retail Park Hexham, which was on the market for around £7.2m. Tenants include Homebase, Poundstretcher, Majestic Wine and Pets at Home.
Sunderland is looking good, too, through Siglion’s activities in particular at the former Vaux site, where work has started on this gateway to the city centre. This will include office, retail, residential and leisure areas, with the master plan bringing forward a flagship development for living, working and relaxing at the city’s centre. This economic regeneration is bound to improve retailing prospects in the city centre in due course.
The Bridges is the central retail anchor with over 100 stores including Primark, Boots, HMV, Debenhams, Disney, H&M, Next and River Island. Zone A rent is around £100. Nearby High Street West is being developed to make it a much-improved retail environment and Next At Home is rumoured to be taking a new store with frontage both into the Bridges and onto Keel Square.
Durham City, with Prince Bishops and The Gates as its main shopping centres, has Saddler Street and Silver Street as ‘High Street’ destinations, where there is interest from retailers for smaller units of around 400-750 sq ft. To illustrate the point, @retail successfully sold Pandora’s lease on Saddler for a positive premium to Smiggle, the Australian retailer of fun and fashionable stationery. Pandora relocated opposite. Zone A rents are now approaching £100 on Saddler St – on par with Silver St.
Middlesbrough and Darlington can be grouped together because they simply have too many shops – some 500 in Darlington alone. In Middlesbrough there is Hill Street, Parkway, The Mall and Linthorpe Road and in Darlington there is Northgate, the Queen Street Centre and New River Retail’s Cornmill shopping centre in Priestgate, where the primary catchment population is an estimated 292,000 with an annual footfall of six million.
South East Northumberland’s Cramlington, which sits between the A1 and A19, has a strong population of around 30,000, far larger than towns such as Morpeth and Alnwick. Its location and potential for further growth may well have been the trigger for Arch to make another acquisition, the shopping portfolio in the town, from Hammerson for £78m. Included is the 440,000 sq ft Manor Walks centre where Zone A rates are £45/£50, a nine-screen multiplex cinema let to VUE, some office space and 1500 car parking spaces.
Finally, out-of-town retailing. The principle is to balance out-of-town with town or city centres, essentially to act as one. The £14m St Helen Auckland shopping park has recently opened, creating more than 100 jobs, but the question is, what impact will it have on nearby Bishop Auckland? As with all these situations, time will tell, but opposition from town centre retailers has been robust.
*Zone A is classified as space closest to the window, considered most valuable. Distances from the shop frontage decrease in rental with Zone B, Zone C and then ‘remainder’ classifications.
**£/per sq ft