BIDs  could revive European retail real estate  investment

Copyright: David Lawson/Financial Times April 2000

Home page

It is not long since suburban retail malls were the ultimate  symbol of prosperity. They remain eagerly welcomed in developing countries but attitudes have changed in economically advanced nations  as awareness grows of the price paid in traffic generation and declining city centres.

  Almost every western European country has either imposed a virtual ban or is considering restrictions.  Little more than a decade ago, UK developers were clamouring to build more than 30 out-of-town shopping centres and dozens of retail parks. The government applauded the idea of better service and new jobs, says Peter Jones of DTZ Pieda Consulting. Within a few years this policy was almost totally reversed is getting tougher with every new set of planning guidelines.

  France invented the hypermarket but went through a similar change of heart even earlier, as did  The Netherlands.  Italy and Spain were late to the party, revelling in plans for smart new developments around major cities. They are already having second thoughts as fears grow about the impact. Five major developments are proposed around  Milan, while Barcelona has already seen a massive flight  to the suburbs.

  There is another side to this equation, however. Investors are just as concerned as politicians about town centres. 'You have to remember that this is where most of their assets are based,' says Jonathan Hallett, international retail associate with consultants Healey & Baker. 'Of the 744 shopping centres in the UK, 720 are in towns.'

 The threats are also not as simple as they appear. Retailers  are rationalising into large regional centres. This leaves many towns more at threat from losing business to bigger neighbours than  out-of-town malls, says Peter Todd, European retail leasing director for Jones Lang LaSalle.

 The private sector is moving away from bitching about planning restrictions and towards co-operation with local authorities to find ways of regenerating cities.  Inevitably, the US has taken the lead, as it was first to suffer the inner-city blight produced by rampant growth combined with laissez-faire planning. 

  Business improvement districts (BIDs) were introduced 20 years ago to link private  and public resources in regeneration of  city centres. Times Square in New York is the biggest advertisement for the way a  world-class location can be rescued from  decline, but there are almost 50  other BIDs under way in the city and hundreds more across the US. Below these are groups like National Mainstreet Centers, which do a similar job in a legion of smaller towns suffering less obvious debilitation.

  Washington has long  suffered the embarrassment of squalid decline within sight of the White House and Capitol Hill. After raising 7m dollars in taxes and grants,  a transformation has begun, says Downtown BID executive director Richard Bradley. Vacancy rates are down by half to 5 per cent and visitors have more than doubled to 8m a year. He is now hoping for a development revival which would boost the 4m sq ft of shopping by half.

   The UK government is expected to publish plans this year for similar schemes called town improvement zones (TIZs), proposed by the Rogers Committee's investigation into urban regeneration. But retailers and landlords have  not been sitting on their hands. Town centre management has grown from a grudging and prickly partnership between business and local government to a boom industry.

 Ten years ago the UK boasted 8 full-time mangers: today there are more than 250. Attendance at the world congress of managers in London this summer will show how other countries have joined the rush, says Alan Tallentire, co-president of the European Federation of Town Centres. Austria has appointed  more than 60 managers while the Walloon district of Belgium alone is planning 32. Spain is sending 15 delegates to the congress,  Norway has  reached  40 managers and Sweden 50 in four years.

 Japan is planning up to 100 by the end of next year, but as Peter Lee,  of Birmingham Centre for Urban and Regional Studies points out, the country's problems are severe, with smaller towns suffering US-style 'hollowing' because of lax planning.

 Management is no panacea, however. Jonathan Baldock, of international real estate consultant CB Hillier Parker, is a leading local authority adviser and founder member of the UK Association of Town Centre Managers but admits that results vary from town to town, depending on how well partnerships work. 'There is less drive in Europe because we have suffered less,' he says. 'There are also no votes in town centres.'

  Peter Todd of JLL sees a structural problem in the UK, where institutions own much of the real estate. As semi-charitable organisations, they cannot make long-term investments with vague targets. Other countries have a better chance because their town centres are controlled by a mix of entrepreneurs.

 But Jacques Blanchard, operations director of Hammerson France, says there are hard economic reasons for redevelopment. 'A key driver is to create the large units demanded in modern retailing,' he says. In Paris, two buildings are being merged into one 100,000 sq ft shopping area at Place Vendome in partnership with AXA.

 Hammerson is also a key player in London, where the Crown Estate is aiming to draw it and other leaseholders into a TIZ at Holborn. Burford has similar plans for transforming an area around the Trocadero, off Piccadilly Circus, to  mimic Times Square.

 But there are major barriers to exporting BIDs. They  are funded by local realty taxes imposed  after a vote among firms. European taxes are collected nationally, so primary legislation would be required.

  Bradley also points out  a lack of appreciation outside the US  of the need for development, strategic planning and advocacy bodies running in parallel with each BID, taking an active role in promotion and development.

 'It is more complex than it seems,' he says. 'I see pieces of the solution in Europe but not the whole picture,' he says.