Iain Mercer: Convenience trumps scale in new retail world

Meanwhile, competition from the internet continues to have an adverse affect on both.

Even the gleaming, car-friendly shopping malls on edge-of-town sites have not been immune to the economic downturn which has already devastated the retail face of once-thriving, “traditional” inner-city districts and many of our smaller provincial towns.

Therefore it is somewhat ironic to report signs of a revival in one area of retail property which, even before the outbreak of the financial crisis four years ago, was being squeezed between city centres and large-scale developments on their peripheries – the suburban, “neighbourhood” shopping parade.

At the end of September my company, Almondale Investments, handed over premises at our office and retail development, WH1 in the Barnton district of Edinburgh, to Sainsbury’s, which had agreed a 15-year lease with Almondale on a 4,000sq ft building under its Local brand. The company’s current UK expansion includes Scotland, with Edinburgh and Aberdeen particularly high on their site acquisition list.

In contrast to the high street, urban neighbourhood shopping appears to be undergoing a revival in some locations, despite the competition from superstores on edge of town sites. It is being driven by companies like Sainsbury’s identifying a demand for convenience stores in relatively well-off areas that are not principally car-borne. The trend has every chance of growing, for two reasons.

One is that the cost of motoring will continue to increase or, if not, traffic congestion will get worse, leading to a demand for local outlets that can still offer food and drink at prices found in the large superstores on the edge of town.

If recent sharp increases in the cost of food turn out to be long-term, families are likely to be more careful about what items they purchase and how frequently they do so – so there may be fewer superstore “monthly shops” in which items are thrown into a deep trolley with little or no thought given to what the bill at the checkout will be.

Indeed, interviewed by John Humphrys on Radio 4’s Today recently, one food chain CEO referred to a growing trend of customers reducing the size of the superstores shop and “topping up” later at their local convenience outlets. Consequently this suggests more frequent and targeted shopping at neighbourhood outlets – accessed on foot or by bus.

The WH1 shopping parade in Barnton, which also includes a post office, ladies gym, pharmacy, gift shop, Chinese take-away and offices, could be seen as a metaphor for this trend.

It was bought by a company owned by my late father, Wallace Mercer, in 1975, since when its fortunes have ebbed and flowed. A few years ago footfall seemed to be in decline because, one assumes, locals were jumping into their cars and heading for places like The Gyle.

A major tenant, WH Smith, vacated and the store (now let to Sainsbury’s) was re-developed into office space as a new headquarters for a security company. Now the cycle has gone full circle because, ten years on, it has been returned to a retail use to meet demand.

Since the deal was signed there has been a real sense of anticipation in Barnton about the new arrival.

Across the country corporate food stores are being attracted to neighbourhood locations by the scale and variety of available properties. Due to the recession, there are many retail units, pubs and petrol stations on the market whose landlords are keen to do a deal. This, of course, means targeting mostly middle-class districts but at least it is helping the commercial revival (or survival) of neighbourhoods, which must be good for the consumer, small businesses and society as a whole.

• Iain Mercer is group managing director of Almondale Investments and Cosmopolitan Investments.