UK town centres need ‘swift kick’ says real estate investor

Copyright: David Lawson – appeared Property Week Summer 1998

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It seems blindingly obvious that high streets should be managed with the same care and efficiency as shopping centres. They are, after all, only roofless malls.  But it has taken the the threat of   competition from out-of-town developments and what one major investor called 'a swift kick up the backside' from the government to bring the message home.

  The problem stems from  fragmented ownership. Shopping centres are usually under the thumb of one owner. Town centres have only  the local authority as a co-ordinating force among hundreds of vested interests. And a council has plenty of other responsibilities pulling on its purse strings.

  Massive strides forward have been made in the last five years.  Many investors, retailers and councillors have learned that it is their interest to work together to halt the decline of the high street. And this has led to some curious alliances.

 The Prudential, for instance, has spent ten years building Cribbs Causeway, a shopping scheme widely anticipated to devastate  retail values in central  Bristol. Yet the UK's biggest fund  is also  backing  the  management scheme for Broadmead, the traditional shopping heart.

   Why play for the opposition? 'Because we have property  we need to protect,' says the Pru's John Proctor.  In other words, management schemes are  not so much a grouping of warring armies as a pragmatic realisation that each asset needs appropriate care.

  There is still a long way to go, however. It is hard to find a big investor who does not claim  to be involved in town centre management. But 'involvement' is a conveniently vague concept. It can be as little as a few pounds  for flower tubs in the street.

    An underlying  problem for fund mangers is  the  lack of performance criteria to justify spending time or money on these schemes. Running up bills on an individual property - or even a complete shopping mall - needs to be  judged against the impact on rents or lettings. Town centres have not yet reached that level of sophistication. It is a recognized weakness that many schemes are based on opinion and anecdotal evidence.

  Key performance indicators are being developed covering factors such as footfall, spending, voids and market share, says Nigel Brooks, who represents the Prudential on the Coventry City Centre Company board. Retailers like Boots are used to using such criteria as part of the fabric of strategic management and are driving the idea forward.

 But information is  still being collected and collated. It could take several years to produce enough evidence to judge specific management measures. In the meantime, investors tend to follow more subjective criteria.

 Norwich Union, for instance, is heavily involved in Bristol, where it  approves of the strongly pro-active council, and has a vested interest in protecting its Galleries Centre on Broadmead. A change of management was  required in  Stevenage, however, before the fund was willing to contribute.

  'It is important to be confident of managers,' says property portfolio manager Simon Garner. 'There are one or two cases where we felt money was being spent in the wrong way.'

  The 'right' way varies between funds. Some insist that benefits are directly relevant to their property - even down to refusing to support measures which they see benefiting  the opposite end of a high street to their property.

 'We are ready to back promotion of whole towns where we have substantial property holdings,' says a spokeswoman for Legal & General. But again the question of management quality comes into play. Participation has  been stifled where the fund was worried about the qualities of managers.

 Several investors  privately question the trend to  to employ  former council staff - and the approach of some councils themselves in these partnerships. A manager steeped in local authority methods will often treat services such cleaning as a cost rather than a way of  drawing customers. 'Car parks can be considered a cash-cow rather than a subsidised service,' said one fund large investor.

  The  standard three-year tenure for town centre managers is another problem. The first year is spent learning about the centre, the second  doing something, but the third often taken up by  a manager desperately touting for new funding - or a new job.

  'Town centres should be run by independent boards with a much longer tenure,' says Garner. This has happened in cities like Bristol and Coventry, which are much admired by investors for their drive and independence from traditional local authority bureaucracy.

  Investors may have only themselves to blame for shortcomings in town centre schemes, however. If they do not participate, they cannot make the changes they demand. There are few big names who completely shun this movement but many appear to pay no more than lip service.

  How can more be brought into the net? Alf Strange has been wielding the significant weight of Land Securities, Britain's largest property company,  for years in efforts to bring in more landlords. Now he moving away from what he calls 'banging the begging bowl'.

  The grudging contributions of a few hundred pounds from multi-million-pound investors  should be nerve-grindingly annoying for investors  like Strange who have spent  endless hours buried in bureaucracy and  promotion - often in their own time.  He has more right than most to complain after  pumping in as much as œ40,000 to centres like Bristol.

 'But you cannot spend too much time criticising small contributions,' he says. Schemes do not always  need lots of cash; half the projects he supports receive none from the firm. The important thing is that investors are doing something.

  'There comes a time when you have to just get on and do what you do best,' he says. 'At the end of the day the best way of winning the battle is to show the fight is worthwhile.'

  Again, that may require hard evidence from performance indicators, showing how investment in town centres has been  improved by co-ordinated management. 'There is a lot of talk about key indicators but not much available. We must do more work. The problem is putting extra paperwork pressure on people who often do this on a voluntary, part-time basis.'

  In the meantime, listing who is involved in town centre schemes and how much they contribute might help. 'Naming and shaming' could pull in investors fearful of  missing out if they know other big players are involved.

  'But this cannot work if it gets bogged down in players who merely want to know what rewards they get rather than look at the wider benefit to a town centre,' says one fund manager working hard to put together a Midlands scheme.

  Eventually, some form of compulsion could be inevitable. 'It may be that we have to go down the route to Business Improvement Districts, where contributions are obligatory,' says Strange