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Should Cherwell District Council be Risking Public Money Buying Shopping Centres?

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As I said in the recent election debate on the BBC, in my opinion they shouldn’t.

There are many reasons it’s a bad idea, both from a business perspective and as part of local spending priorities.

I’ve worked in retail nearly all my life.  I built and ran a national chain of jewellery stores across the country and traded in several shopping centres, including some of the most prestigious in the country such as Bluewater in Kent and the new Bullring Centre in Birmingham.  I write a regular column for Retail week Magazine and comment regularly in the national press on retail issues as well as offering consultancy services.  One of my main focusses is independent retail and commercial property.  So I know a little bit about what I’m talking about.

Cherwell District Council (CDC) leader Barry Wood claims that buying the Castle Quay Shopping Centre in Banbury is a good deal for the people of Cherwell.  This decision was also backed by the Labour group on the council and their leader Sean Woodcock has assured me there’s a good business case for doing it.  Unfortunately neither of them have been able to show it to me so far.

Their belief is that buying a commercial property like a shopping centre is a good idea as property will always rise in value.  This may be the case for domestic property and some kinds of commercial premises, but not always with retail space.

A Good Investment?

The argument for buying the scheme seems to be that if they hadn’t, the centre would have shut down.  It has many long term empty units and is generally struggling to compete in an ever crowded marketplace.  The council’s decision a few years ago to allow a new shopping park to open on the outskirts of Banbury haven’t helped its plight.

It’s extremely unlikely though that it would have closed down.  Much more likely that it would have been offloaded by its pension investment owners to another investment company with more experience of running a shopping centre than some local councillors.

Moreover, if the argument is that the centre was about to collapse, that doesn’t exactly make it an attractive investment for public money does it?

There have been some shopping centre failures in the past, but they are few and far between.  But when they do go, they tend to go completely.  That means an almost total loss for anyone unlucky enough to be the owner at the time.  There will be some residual value in the land, but that’s unlikely to reflect the full price paid for the whole development.

There have been a growing number of retail failures in recent years with 650 collapses so far this year alone, and we’re not even half way through yet!  Some of them very high profile and heavily leveraged operations.  Others are busy negotiating partial closures and rent reductions with their landlords.  Others are moving more into the online arena and abandoning physical retail space almost altogether.

None of this bodes well for an under-let, under-invested and down at heel shopping centre in a struggling town in North Oxfordshire.

So essentially CDC are gambling with public money against the odds.  And it doesn’t end there.

Other Costs

According to Barry Wood the scheme is turning a profit at the moment, but as I’ve said previously, I’ve not seen evidence of that.  I have seen a large number of long term voids in the centre, and with the potential for these to increase in number I fear the profitability may be marginal or likely to decline.

There will also be ongoing running costs for the centre and presumably additional investment to do whatever it is with the place that they feel will revitalise it.  Again details on that are sketchy, but I think there’s some talk about dividing the larger units into smaller ones to attract independent retailers.  Whilst I support that idea to some extent there are a lot of things to consider about that course of action.

Firstly the cost of doing the work, which may include major re-modelling of the units due to, amongst other things, fire regulations.  I’ve seen at least one shopping centre management come unstuck with similar plans due to rules on access to fire exit routes.

Helping Smaller Retailers?

Secondly smaller independents usually don’t have a huge budget for shopfitting, so there will be additional cost in partially fitting out the units, including new shopfronts etc to attract smaller operators and to ensure that their stores fit in with a modern shopping centre scheme.

Business Rates

Thirdly there’s the loss of business rates on the empty units that are there now, and will most likely be there for a while.  Considering the current climate in retail there’s also a good chance that voids could increase.  At the moment the landlords will be paying rates on those premises even though they’re empty and a good deal of that money goes to CDC.  With the council now being the landlords, they’re going to be paying the rates to themselves, effectively wiping out that income.

Devaluation of the Asset

Finally there’s the issue of valuation.  Shopping developments are broadly valued on their rental potential.  This is why landlords will leave units empty rather than let them out at a reduced rent.  If the council’s plan is to lower the rent for smaller or other retailers, that will have a knock on effect on the value of those units and then on others when rent reviews come around.  Other tenants now paying a higher rent will also push for a reduction when their leases come up for renewal or rent reviews are due or maybe even before.

The net effect of this would be to push down rents, not only in the centre but across the town, reducing loan to asset values across the board.  In broad terms I’d welcome that.  I’ve long argued that retail property values are hugely inflated.  But in terms of the Council’s investment exposure in Castle Quay it’s a potentially dangerous situation, not only leading to a potential devaluation of the asset, but also any loans secured on it being partially called in.

There may be some balancing in terms of appreciation on the total asset value, but in the current climate and in a falling retail market, there a very good chance that the overall value of the scheme will fall relative to the amount the council has sunk into it, both as an initial investment and any further day to day expenditure.

All of this appears to have passed Cherwell Councillors and the leaders of Labour and the Conservatives by.  They obviously have a very patchy understanding of how retail property works and the implications and pitfalls they are letting us all as council tax payers in for.

Moreover there’s the question of if so much money should be focussed in the north of the district while ignoring other areas.  Mr Wood commented in the Radio debate on Wednesday that he recognised that there were empty units in Pioneer Square in Bicester and that it was difficult to get them filled.  Yet this doesn’t seem to have concerned him over the purchase of Castle Quay.  Indeed, having set the precedent in Banbury I asked him during the debate if the council intended to buy Pioneer Square as well.  He didn’t reply.

Other Options

A more sensible and prudent approach to the problems in both areas would be to work with the landlords rather than bailing them out with public money.  Leave them with the risk whilst introducing local initiatives that help smaller retailers get a foothold and would also support the centre.

These could include rates reductions, which Barry Wood dismissed out of hand when I challenged him on it during the election debate.  Neither he nor Sean Woodcock appeared to know that it has been within the gift of local councils to reduce rates on specific properties at their discretion for several years now.

If they wanted to provide smaller, more affordable space for independent retailers, they could lease units from the centres on a medium to long term basis, probably negotiating favourable terms with the landlords as a council will have a very good covenant.  These could then be divided up (if required) and then sublet on flexible terms on reduced rents to retailers, although this would have to be agreed beforehand with the landlord for the same reasons discussed above concerning rental levels and valuations.

This would achieve the same aim of revitalising schemes both in Banbury and Bicester and would not involve the council in risking large amounts of public money.  It would also mean that the bulk of the £60m they are now tying up in one area could be spread across the district.

This is the kind of strategic thinking we need, rather that the amateurish speculation of a council who seems to want to play at being shopkeepers with our money.  This is why we need a more diverse representation on the council and councillors like me who will challenge these misguided moves before millions of pounds of desperately needed council funds are put at risk.

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Business Doesn’t Have To Be Bad

Untitled-1As a businessperson, a long time retailer, and now a retail commentator and journalist, one of the most difficult things for me to reconcile is my involvement in the promotion of consumerism.

That’s at odds with my more recent conviction that we can’t continue to squander the world’s finite resources on WANTS, whilst ignoring the NEEDS of most of the planet’s population.

The Green Party might be seen by some as an anti-capitalist movement. We are however a broad church with many facets. I was encouraged to become a candidate BECAUSE of my business experience rather than in spite of it, and I saw that as an encouraging aspect.

I’ve run large companies, and I now run a small one. I’m probably something of a gamekeeper turned poacher. But I’ve seen both sides of this debate and come to realise that the idea of continual economic growth is indeed a myth. And one we have to stop believing before we run out of road.

I was at the launch of a new book by Naomi Klein a few months ago.  She makes some interesting points about the connections between environmental issues and the global economy.  The basic tenet is that when resources and commodities are monetised on the kinds of scale they are now, the result is economic and environmental catastrophe. And we’re just getting a taste of that.

The direct impacts are of course climate change, which if you ascribe to that view, is starting to bring with it the kinds of drastic changes in weather patterns that we’ve seen in recent years.

These are all things we’re having to come to terms with now and they’re all traceable to global economic activity. They affect all our lives, not just personally, but in broader human and economic terms.

I’m a vocal advocate of social enterprise, and believe that there are many big businesses out there that can be made to take a more ethical and responsible stance if we create the right conditions to encourage it.  And happily for me there is already a growing movement within the more enlightened areas of the business world towards ethical business and sustainable capitalism.

That might sound like some thing of an oxymoron, but in many sectors of business now there’s a realisation dawning that if we continue to squeeze the pips of the economy, we’ll eventually run out of juice.

Amidst calls from some people for a revolution against rampant capitalism, I see the future as more of an evolution towards a business ethos that views social justice and connection with local and national communities as an asset, rather than an inconvenience.  I’m certainly not anti-capitalist, but I am anti-unfettered capitalism. I agree that the market should be allowed to decide some things. But I believe the state has the job of holding us all to account for our actions and tempering the excesses of marketisation to prevent it working against the common good.

And it’s not just us greeny types taking up this mantra. Many key economists and business commentators are now having similar epiphanies about how business and consumption needs to be managed in a sustainable, responsible and accountable way, if we’re all going to avoid a backlash against the kinds of excesses and irresponsible business practices that became prevalent over the past 20 or 30 years.

Essentially businesses need to grow up and take responsibility for the societies we’ve helped to create.

I’ve recently become very interested in something now being called the circular economy, where consumption itself is fed back into the creation of new resources and products.  This doesn’t just encompass recycling, but also upcycling and renewable energy as part of the manufacturing process, along with emergent technologies, social media, and the fourth economy, comprising enterprises that not only make a profit for business owners, but also put something back into the social economy.

That might all sound a bit hippy and tree-huggy, but it’s something that’s being taken very seriously now by many key figures in the business world. Most notably Bill Gates and Richard Branson. And with good reason.

If you can make money with clean conscience, look after your employees, business partners, suppliers, and most importantly the planet AND enjoy what you’re doing, what’s not to like?

You also get to sleep pretty well at night too

So I hope I can convince you that there is scope within a Green World for enterprise and innovation. Without the need for a constantly growing economy and an ever greater consumption of the worlds finite resources.

With the potential for over a million green jobs out there, and an ethical economy that has only scratched the surface of an emerging market, there are plenty of opportunities for business leaders and entrepreneurs in a future Green and pleasant land.

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Visit to Banbury Market 17th January 2015

market sheetLast week myself and John Haywood from the Banbury and Cherwell Green Party visited the market in central Banbury to speak to the stall holders about the changes being proposed to this 1000 year old tradition in the heart of an historic town.

We spoke with all the stallholders present, although sadly they were only 10 of them trading on the day.  They were all all opposed to Cherwell District Council’s illogical and damaging decision to restrict the stalls to the Cornhill end of the Market Place.  A plan also supported by the Conservative controlled Town Council.

I started my own 25 year long retail career on a market stall, and worked it for 7 years with my partner though rain, hail sleet, snow and sunshine.  I know how difficult it can be to make a living and how fragile the trading environment can be.  Your livelihood can depend on so many variable factors, and one of the major fears is losing your regular pitch, for whatever reason.

It may seem silly to anyone who hasn’t traded in a market themselves, but where your stall sits can make all the difference between success and failure.  The location of competing trades, the flow of people moving through the market, who your neighbours are, your visibility and prominence in the market as a whole are all desperately important.

There appears to have been absolutely no consultation with stall holders or customers about these unpopular changes, and based on what stallholders and visitors told me I foresee them being the death knell for this historic trading post as more and more traders fall by the wayside.

So what seems like a minor change to the council, will probably be anything but to the people trying to make a living out of the market.  This move could likely kill it off!  it’s already become smaller and therefore less popular, especially over the last 20 years. In 1997 there were 120 stalls, now its down to less than 20.

Considering it’s reduced pull for consumers it’s completely incongruous that the rents being charged by the private firm managing on behalf of the council are almost double that charged by neighbouring markets such as Abingdon, Aylesbury, Hinkley, Oxford and Thame.  And as with most things these days, the rent goes up every year.  Meanwhile trade is slowly dwindling away to nothing, leaving regular and loyal traders quite literally out in the cold.

saleThe Council’s plan includes opening the Market car park for use on Thursdays and Fridays. There is no evidence to suggest this will increase car park usage and revenue to the Council – people already using other car parks such as that near to the Matalan Store will simply park in the market place instead.

Government initiatives on town centre regeneration called for more emphasis and support for market days and the traders that build and run these vital hubs of trade and local amenity in our towns and cities.  The Portas review cited markets as one of the easiest ways that town centres could be revitalised and kept alive.  Why then is the Conservative run Cherwell Council ignoring the views of it’s own established market traders?  Why are they proposing moves that could potentially irreparably damage trade in such an established and once vibrant local fixture?

Banbury market should be seen by Cherwell Council as an asset to the town.  They should be supporting it actively and engaging with the traders and customers to find ways of safeguarding the it’s future, rather than taking unilateral actions with no consultation.

This is a Charter Market, which bestows on Banbury the status of a Market Town.  By birthright it should be located in the Market Square.

I would urge Cherwell councillors to do what I did.  Take a walk around the market and speak to the people whose livelihoods are in their hands.  Speak also to the local residents and patrons of the market and ask them what they think about the priorities that they are planning to enforce on everyone.

This is not a decision that can be taken just by moving squares on a map.

me and john landscape