Shopping malls' desperate decline comes to prime minister’s doorstep

This article originally appeared in The Guardian on 20th October 2018:

Nicholsons in Theresa May’s constituency is just one of hundreds suffering from the UK’s high street malaise.

With its deserted tables and recycled office furniture, the Ping Pong Parlour in Maidenhead’s struggling Nicholsons shopping centre is not fooling anyone.
The desperate attempt to fill what used to be Argos is evidence of the losing battle fought by private equity investors who have surrendered the keys after the mall’s declining fortunes left them unable to meet huge loan repayments.
The financial failure of the affluent Berkshire commuter town’s main shopping centre has brought this year’s high street crisis directly on to the embattled prime minister’s doorstep.
Theresa May has been Maidenhead’s MP for more than 20 years but rows of empty shops contrast with noisy construction work as new flats populate the town’s revamped waterways, making it hard to tell whether its fortunes are falling or improving.
On Thursday, clipboard-wielding market researchers were canvassing shoppers’ views on the squat mall built on the site of the Nicholson’s brewery in the 1960s. One middle-aged woman does not sugar-coat the pill, rating the experience “one out of 10” because “shops keep shutting”.
It’s hard to disagree, with at least 20 of the centre’s 50 large stores empty or being marketed by property agents. The precinct bears the scars of a hiatus that has seen about 30 chains, including Toys R Us, Maplin and House of Fraser, go under this year in a domino run that has affected 2,100 stores and nearly 40,000 jobs. The metal grille over Poundworld remains shut as shoppers flow in to the centre from the weekly fruit and vegetable market on the high street.
With all eyes on the Brexit negotiations in Brussels, attention will swing back to the UK in 10 days when the chancellor, Philip Hammond, delivers his budget.
The fallout from last year’s business rates revaluation, which will add another £180m to retailers’ bills in April, has been the final straw for some struggling chains. Hammond is now under increasing pressure to make internet retailers share the load.
Fashion store Next dealt the Maidenhead centre a blow when it followed Argos out the door. Avid Vogue reader May now has little to choose from locally, apart from H&M (which she attended the opening of two years ago), Topshop or Marks & Spencer.
“If this shopping centre disappeared, the town centre would die,” says one worried store manager . “People’s shopping habits have changed; young people don’t shop in shopping centres, they shop online. Amazon has taken over: why pay to park here when anything bog standard can be ordered online and delivered the next day? This situation is not unique. It is happening everywhere.”
When private equity property investor Vixcroft teamed up with a hedge fund to buy Nicholsons for £37m in 2015, the centre’s selling points included Crossrail and numerous upmarket residential developments on the horizon. The price tag, backed with a £26m loan, was less than half the £85m paid when it changed hands in 2007.
Some property experts fear that Nicholsons, which has been pushed into receivership, is just the tip of an iceberg as hundreds of shopping centre deals brokered in the early part of the decade turn sour.
Property asset firm Apam counts at least 175 malls in similar straits as high street names queue up to shut stores or negotiate lower rents. Retailers including Carpetright, Mothercare, House of Fraser and New Look have resorted to company voluntary arrangements – a form of insolvency – to close down shops, dramatically reducing the rental income collected by centre owners.
Apam executive Simon Cooke says private equity investors did not anticipate the perfect storm created by business rates, weak consumer confidence and the fallout from Brexit: “They came with a five-year plan, in a five-year fund and with five years of debt. They thought they would be able to do a couple of new lettings and sell it on.”
Business rates have become a lightning rod for angry retail bosses saddled with expensive property portfolios in an internet age.
Retailers in parts of the country where there have been property booms have been especially hard hit because rates are calculated as a proportion of a property’s value on 1 April 2015. As a result, Maidenhead’s total rates bill will increase again to £57m next year. That is £6m more than in 2016, the equivalent of a 12.6% increase, according to real estate advisor, Altus Group.
Nicholsons owners, however, cannot blame its woes on business rates because its retailers’ bills have been cut by a third – a result of what Altus’s Robert Hayton describes as a “seismic shift” down in the rents being paid in the centre.
Another problem for Nicholsons is that shoppers prefer bigger nearby centres such as Reading’s Oracle.
Mary, a volunteer in the Maidenhead Heritage Centre where the attractions include a Spitfire simulator, heads to the upmarket Windsor for her retail therapy. “The shops in town have been closing for a number of years,” she says of Maidenhead. “There’s a lot of money around here but we don’t seem to get the facilities.”
Councils in Kent and Shropshire have resorted to bailing out struggling malls and it remains to been seen who might be prepared to invest in the Maidenhead mall.
“Some of these centres will ultimately be closed down if nothing is done, as the income will fall to below the running cost,” says Cooke who suggests long-term partnerships with councils are the answer. “This is not about property investors and banks losing money. It’s about the future of town centres and whether they are going to be safe, vibrant places for all generations to visit. It’s a big question for government.”
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