Department stores looking out of town

Last week it was reported that House of Fraser, the department store, is drawing up plans to open out-of-town stores in retail parks – usually the preserve of furniture and electricals retailers.

House of Fraser usually takes space in shopping centres or city high streets.

The reason for the change in strategy? The severe lack of new town centre and shopping centre developments in the UK.

Adam Patrick, partner at out-of-town retail experts Edgerley Simpson Howe, told Property Week magazine: “After years of being able to secure prime, good-quality shopping centre and town centre space, frequently on very favourable financial terms, many of the main department store chains have seen their pipeline of new space significantly reduce.

“It’s now often unviable for developers to make new department store-anchored developments available in the short-to-medium term, mainly due to funding shortages or poor returns. Many of the department stores are still trading very profitably and are keen to trial new formats. Equally, most of the main stores still lack comprehensive geographic coverage throughout the UK. The out-of-town market therefore offers an ideal alternative in which these chains can expand quickly and on a relatively large-format basis.”

The lack of mega-malls could also help drive some retailers back into town centres, which have been so battered by the growth of the edge-of-town shopping centre and supermarket. The economics of smaller stores are harder to make work. But retail observers believe that developers who target market towns could boost struggling economies and provide retailers looking for space with what they want.

Adam Patrick, Sunday Telegraph (September 2010)