The Midlands retail sector is enjoying unprecedented levels of development despite the continued growth in online shopping.

Online spending now accounts for almost a fifth of the retail sector with UK consumers spending twice the EU average and now ahead of the United States, but investment in new and redeveloped retail space is now at its highest level since before the 2008 crash.

Major redevelopment and expansion plans across the region

In the Midlands alone there have been five new shopping centres opened in the last 18 months totaling more than 1,000,000 sq ft. There is a further 2,440,000 sq ft of proposed new space with at least outline planning, and proposals for expansions or redeveloping existing sites totaling a further 1,840,000 sq ft.

Major schemes with outline or full planning include the 650,000 sq ft City Sentral project in Stoke, the 620,000 sq ft City Centre South project in Coventry and the proposed 304,000 sq ft Friarsgate development in Lichfield.

Existing retail centres that are planning to expand or undergoing significant redevelopment include the Pallasades as part of the Grand Central development in central Birmingham, the Merry Hill Shopping Centre in Dudley that is considering a 538,000 sq ft second phase and a 115,000 sq ft extension to Touchwood in Solihull where a development agreement has been signed.

Challenges remain on the High Street

Speaking at the Birmingham Real Estate Network event – a joint initiative between Lambert Smith Hampton, BDO and Shoosmiths – LSH’s Head of Retail in Birmingham, Richard Jones, said the high levels of investment masked significant challenges on the High Street.

He said: “We are seeing an increasing dominance of city centres and out of town retail development, yet many town centres in the region continue to suffer. While business failures have fallen in the past year, we are still seeing some of the highest levels of empty units in the West Midlands compared to the rest of the UK.

“The result is that we are seeing a very mixed picture in terms of rents across the region. Across the board we have seen rents fall on average by around a quarter since their 2008 high although there has been little change in areas like Birmingham, Nottingham, Solihull and Stratford Upon Avon whereas towns such as Walsall, Redditch, Nuneaton and Kidderminster have seen falls of more than 40 per cent.”

Richard said the onset of digital was driving change in the sector with major retailers rationalizing their offer and that the polarization of retail centres was likely to continue - putting further pressure on traditional High Streets.

He said: “Differentiation is going to be critical for more traditional town centres with more emphasis on independent and boutique retailers where the product offer and customer service are seen as a better proposition than some of the larger multiples.

“We have also seen some towns look at specialization such as Hay on Wye with bookshops but these opportunities are limited and focusing on leisure by tapping into the growing casual dining and general food and beverage sector. Cinemas, gyms and hotels could also play a key part in breathing new life into our regional town centres.”

Explosion of click and collect

Also speaking at the event was BDO’s National Head of Retail and Wholesale, Sophie Bevan, who said there was a “blurring of the lines” between online and traditional retail.  The explosion of click and collect is tipping the balance away from the pure online retailers and back to those with a physical presence. In a sign of just how important stores have become to this process, Amazon has started to trial physical stores in the US; something we could see coming to the UK. 

She also said that the most successful retailers will be those that smooth out the customer journey. Retailers that allow customers to move seamlessly across channels, from online to in-store, will come out on top.