Local councils are set to spend £1bn on buying shopping centres by the end of 2020, in a bid to redevelop town centres “depressed” by a wave of store closures.
Research from retail property organisation Revo and property and regeneration advisors Lambert Smith Hampton (LSH) has found that local authorities have invested over £770m in shopping centres since 2016, accounting for almost one in five transactions.
The data from the ‘Fixing Our Broken Town Centres’ report, shows that councils have accounted for 12% of all shopping centre investment by value since 2016, peaking at 16.7% in 2018.
Local authorities’ increased appetite to acquire these assets contrasts sharply with the attitude of UK institutions, who have completed net sales of £1.84bn since 2016, and UK real estate investment trusts (REITs), who are net sellers by £309m since 2017.
The report includes a survey of 200 leaders and senior professionals from the regeneration sector, with public and private sector respondents agreed that public-private joint ventures are the preferred method of advancing town centre regeneration, cited by over two thirds (69%).
It also found regarding the top five challenges to town centres an overwhelming majority of respondents identified the growth of online shopping (70%) and high business rates (69%) as the main reasons.
Steve Norris, national head of planning, development and regeneration, LSH, said: “Our research shows that local authorities across the UK have become very active buyers of shopping centres as a means of taking back control and accelerating the regeneration of town centres.
“With UK institutions and REITs set to further reduce their exposure to retail property, the public sector investment we have seen up to now may just be the tip of the iceberg.”
He added: “We are fully supportive of councils acquiring shopping centres as a catalyst for change, but only where they are underpinned by robust and fully costed business plans and investment strategies, as part of wider regeneration and income-generating objectives.”
Ed Cooke, CEO at Revo, said: “We need further intervention from Government to address the structural issues which are impacting retailers and other businesses, as well as the planning restrictions which make it difficult for the built environment to keep pace with shifts in consumer behaviour and lifestyles.
“Whilst supportive of initiatives such as the High Streets Fund and Towns Fund, Government has to work with industry to explore the benefits of an online sales tax to allow for significant business rates reductions, ensuring our towns and cities remain places where businesses want to continue to invest, benefitting local economies and the physical environment.”