Something to remember in the coming years

As is so often the case in journalistic circles, last week saw two very conflicting reports that concerned themselves with the same topic; namely that of the worsening economic climate in the UK and what knock-on effects this downturn will have for the retail sector, in particular in London.

First, a report by a very well-respected retail research and consultancy company was released, stating that because of the deepening crises the UK economy finds itself in, any new retail activity will continue to move outwards and away from city centres. This movement has happened over the past few years, whereby out-of-town centres have been luring shoppers away from city centres with the promise of brand availability and discounted goods. The report went on to suggest that the capital had a significant over-supply of retail space and retailers will wish to continue to relocate to cheaper, further away locations as opposed to investing in duplicate outlets.

The greater availability of land, a proxy for greater amounts of potential retail space, with lower rents have meant that these centres have been able to offer an equally broad mix as that which can be found in city centres. Coupled with this are the lack of issues such as parking, congestion charges, etc, so that these centres have profited very highly in the past decade or so. The report also suggests that because of the decreasing levels of readily available or discretionary income within the population, the movement to these centres will become greater than ever, as discounted prices will be increasingly appealing. The forecast result is that sales at out-of-town centres are forecast to grow at just under 25 per cent in the coming five years.

Conflicting with this report is a statement that has come from the world's largest shopping mall owner, Westfield Group, which is currently developing two malls in London.

Westfield, by contrast have stated that London is undersupplied with retail space, and that they continue to be very bullish about the malls they are building. This is because their strategy is to look through or beyond market cycles, and not to become too concerned with the here and now. Their malls, which are located in West London (known as the Westfield Centre) and East London (near the Olympic Park) are costing in excess of £3 billion, the first of which is due to open in six weeks.

With such vast amounts of investment tied up in these projects and with retail sales at a 25-year low, some may think their optimism may appear to be a little misguided. However with retail giants, Marks & Spencer, John Lewis and Debenhams all on board, the constantly improving transport links to both areas of London, and their wealth of experience and knowledge as to how to run and operate malls, Westfield may just pull it off.

The point here though is not about who is right or wrong with their market outlook (agency vs Westfield) but about the fact that market growth through diversification or new opportunities continues regardless of the ups and downs in the retail market. This is something that we should remember in the coming years as we look to challenge market constraints such as market space capacity and brand saturation.

The writer is head of GRMC Retail Services, Dubai.