Glasgow's dramatic retail expansion is raising questions about its sustainability

Published on Saturday 20 June 2009 14:46

FOR decades, families have descended on London from all over the world to visit the iconic Hamleys toy store. Every Christmas long queues of eager children, and parents with their own fond memories of the shop, gather outside the Regent Street landmark.

The store, which has been trading for more than 250 years, attracts 21st-century youngsters without losing its traditional appeal. Even the Queen gave Hamleys toys to her children, carrying on a Royal tradition. And Hamleys' in-store entertainment, from magicians to clowns, makes it more of day out than just a shopping trip.

From October, Glasgow shoppers will share the attraction of the renowned store as Hamleys has chosen the St Enoch Centre for the site of its first large, standalone store outside London. It is seen as a major coup for St Enoch and the move must have come as relief to owner Ivanhoe Cambridge as the property developer is pumping 100 million in to what was becoming a tired centre and has added a 250,000sq ft extension to the complex.

But Ivanhoe's timing is yet to be tested. While Gudjon Reynisson, chief executive of Hamleys, says St Enoch is an "impressive development", questions are being asked about the sustainability of Glasgow's plans at a time when the high street shops are closing.

Reynisson is not alone in thinking Glasgow is the place to be for retailers, and investors have committed to maintaining the city's position as the top shopping destination in the UK outside London. Buchanan Partnership, a joint venture between Land Securities and Henderson Global Investors (HGI), has committed 400m to double the size of the Buchanan Galleries over the next four to five years. Developer PNB Properties is spending 80m to pull down the Savoy Centre, built in the 1970s, and replace it with a hotel, restaurants, retail and office accommodation.

But the optimism around Glasgow flies in the face of figures released last week by the Scottish Retail Consortium. It published the worst sales figures for almost nine years and a spokesman slammed "talk of green shoots of recovery" as "clearly premature".

The recession has hit the sector hard in the UK with well-known brands such as Coast, Karen Millen, Oasis and Principles, all part of the Mosaic group, Woolworths and MFI being among the many forced into administration.

So how is Glasgow bucking the trend and can its growth continue as other regional centres suffer? Public sector investment in central parts of the city has clearly helped. "The council had the foresight to pedestrianise and enhance Buchanan Street and that will continue to bear fruit," says Richard Low, a partner with developer Cogent Property Solutions (CPS).

As a result, rents are relatively high with landlords being able to command 250 for a square foot of retail space along the street, compared with around 150 in neighbouring locations. Buchanan Street now houses the likes of designer store Vivienne Westwood in the upmarket Princes Square centre.

Commentators also talk down a danger of the city centre becoming over-saturated. They say there is room for an expanded Buchanan Galleries alongside the revamped St Enoch Centre because they are targeting different types of shoppers. While the former has John Lewis, St Enoch houses BHS and Debenhams.

What has surprised some commentators is that Glasgow city centre does not appear to have suffered badly from out-of-town developments such as Braehead to the west of the city and the giant Silverburn in the south. The developments appear to be prospering without cannibalising the city centre's customer base.

Low, of CPS, the developer of Silverburn, says it predominantly attracts shoppers from the southside, although many do come from further afield and buses run regularly from outlying towns. CPS has the confidence to commit 20m to complete the third and final phase of its expansion.

Low says the 75-acre mall just off the M77 has seen its footfall increase 7.8 per cent on last year. While it lost ten retailers to administration, it has managed to re-let all but one shop. He describes Silverburn as one of the winners in the current climate.

He says Tesco at Silverburn is ranked number one in the UK for non-food sales and stores such as Next and New Look decided to locate at the centre because of the relatively large units. While Silverburn may have taken some of the shine off Braehead, it has managed to compete with its bigger rival.

Jim Duffy, head of in-town retail at Colliers CRE, which acts for Braehead's landlord CSC, argues it has a number of attractions which are absent from other centres. For example, Braehead has an Ikea and the Xscape indoor leisure and ski centre which draws families on a day out as well as shoppers.

New retailers have been drawn to the centre, including fashion store Lipsy, which has chosen Braehead for its only Scottish outlet.

However, Glasgow is not immune from the downturn, with landlords having to accept lower rents from retailers driving a hard bargain. Crucially, Glasgow city centre's so-called "Golden Z"– Sauchiehall Street, Buchanan Street and Argyle Street – is also changing. Last year, retailers in the Z were asked to vote on whether to make the area a business improvement district (BID) and brand it the Glasgow Style Mile. BIDs are partnerships between local authorities and businesses which allow for local improvements to be devised and financed by those in the area.

It was estimated the BID would have brought in 4.5m over five years by increasing footfall through more targeted marketing, improved shopping and leisure facilities for local customers and tourists, and developing better access to the area. However, the BID application was rejected by retailers who did not want to pay the 1 per cent additional levy on their rates that would have been required.

Claire Dunning, president of Glasgow Chamber of Commerce, says: "That the Style Mile BID narrowly lost out was obviously due to the effects of the credit crunch, but the Style Mile ethos still exists."

She adds that the council, the Chamber, the City Marketing Bureau and other agencies are working together to attract more retailers to invest in the city. The council has created the post of city centre manager to oversee a three-year programme to expand the sector's contribution to Glasgow's economy.

They will have their work cut out as property and retail commentators warn the Golden Z is already being reduced to a Golden I that runs along Buchanan Street, book-ended by the Buchanan Galleries at one end and the St Enoch Centre at the other. The losers are the west end of Sauchiehall Street and the eastern end of Argyle Street. "The Z will become an I, with Buchanan Galleries at the tip and St Enoch Centre at the foot," Low says.

Estelle Forrester, an associate director with property firm CB Richard Ellis, adds: "The core retail area of the Golden Z is contracting somewhat with fashion retailers concentrated along Buchanan Street."

Even landlords in the Golden I are being forced to negotiate with retailers who are driving a hard bargain. Headline rental rates can be meaningless because of the incentives being offered. Forrester says: "Some retailers are being opportunistic on deals and are looking for rent-free periods and breaks in their lease. They will go wherever these deals are offered."

Nicol admits St Enoch has not been left unscathed by the recession and footfall has been down by around 10 per cent. "Leasing can be tough and problematic, so we've had to work hard. We've also been giving our retailers a lot of support."

While Glasgow shores up its retail sector, Edinburgh has been hit by the double whammy of recession and tram works ripping up the city centre.

But it is retaliating against Glasgow's dominance. Scotland's only branch of Harvey Nichols has helped Multrees Walk, often referred to as "Millionaire's Walk", attract designer stores including Louis Vuitton and Giorgio Armani. However, Low says such expensive stores will only attract shoppers from outside the city once a season.

Robert Winter, manager of Princes Mall, says 10m of investment in his centre has improved its atmosphere and the quality of its facilities, including its range of restaurants, which will attract new shoppers. However, he admitted footfall is slightly down on last year, although he would not disclose the figure. He argues that while the tram works have had an adverse impact on Princes Street, shoppers have been displaced to George Street rather than avoiding the city centre altogether.

"The tram works will have considerable long-term benefits for Edinburgh. I think Edinburgh is fighting hard to keep itself as an attractive place for business and shoppers. The tram is a major piece of infrastructure that Glasgow won't have," says Low.

A major part of Edinburgh's planned resurgence is the ambitious 850m project to redevelop the St James Centre – the "capital's ugliest building". The council has given owners HGI planning permission to transform the site, taking in New St Andrew's House, and rebrand it the St James Quarter. HGI says the development will include "world-class" retailers, up to 250 apartments, two hotels, around 160,000 sq ft of office space, "vibrant" public spaces, "high-quality" cafs and restaurants, improved public transport and 1,800 underground parking spaces. It aims double the amount of retail space to over 1 million sq ft with up to 90 stores, although the existing John Lewis will remain as its flagship.