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Ikea's high street flat-pack solution

ikea hammersmith

Drapers examines what Ikea’s shopping centre purchase could mean for Hammersmith and UK high streets. 

Earlier this month, Ikea’s property arm, Ingka Centres, bought Kings Mall in Hammersmith, west London, as part of a £170m investment into the area. It was the first step in the Swedish home furnishing giant’s plan to transform traditional shopping centres worldwide into “urban meeting places” in a bid to reinvigorate the high street based on “community needs and aspirations”.

The redeveloped mall will be anchored by Ikea’s first high street store, joining its order-and-collection fascia in Westfield Stratford. The west London space will offer 2,000 home furnishing accessories to buy in store. Customers will also have access to Ikea’s interior design services, and the entire product range will be available to order for home delivery.

Ikea has its sights set on a further 40 big cities around the world to roll out the “meeting places” concept, and is understood to be looking at additional locations within London. As a retailer landlord that says it aims to support surrounding communities, could this investment strategy be the saviour of the failing and homogenous UK high street?

Community approach

Kings Mall opened in 1980 and has 40 stores, including Clarks, H&M and Primark. One property source called the redevelopment of the centre “much needed”, and Ingka Centres says it will happen gradually as tenants’ leases expire, but will include a “significant retail component” alongside food and beverage, leisure and entertainment offerings. 

The £170m investment will also aid the regeneration of King Street, on which the mall is located.

“All of our meeting places are shaped by their community,” said an Ingka Centres spokeswoman. “We co-create them to meet the needs of local people – we don’t have a ‘one size fits all’ approach.

“[The redevelopment] will be done through our ‘Meeting Place Making’ workshops with a wide range of stakeholders that enable us to develop localised destinations with value for our customers and the wider community.”

Ingka Centres currently owns 44 malls globally, but this is the first time it has bought an existing shopping centre rather than building its own. Existing fashion tenants at Kings Mall would not comment to Drapers for this piece, but industry observers are positive about the early signs.

Anything that creates a buzz and attracts footfall is a good thing. I applaud it in every way 

Retail chairman

“This seems like a smart choice from Ikea,” said one fashion retail executive. “Institutional investors are shying away from retail and there must be some great bargains to be had at the moment. It’s the first high street Ikea and will undoubtedly bring in customers from the surrounding area as well as locals, which should benefit the fashion retailers currently there and local businesses.”

Another industry chairman agreed: “It seems like an incredibly sensible idea, and a good use of space for a concept that is suitable to shopping centres of that age that are functional rather than beautiful.

“It will bring the right kind of people back into city areas: young, affluent customers. Anything that creates a buzz and attracts footfall is a good thing. I applaud it in every way.”

Cl9 hammersmith refurb photo 0891

Primark is a tenant at Kings Mall, and observers have drawn comparisons with the retailer’s giant Birmingham store

Property experts drew comparison to Primark’s purchase of Birmingham’s Pavilion shopping centre, which it transformed into its largest store with five floors of fashion, beauty and food. Since opening in April, the 160,000 sq ft flagship on Birmingham High Street has drawn in customers from as far as Scunthorpe on specifically marketed overnight coach trips.

“The best new store opening I saw in the UK last year was Primark in Birmingham, which was a retailer buying a shopping centre and converting it for their own use,” said one retail property investor. “Historically, Primark would not have wanted to take that store but, as a business, it has found different ways to work and, like Ikea, it shows a retailer thinking laterally.

“The most interesting thing about Primark was its localisms, and Ikea seems to be taking a similar approach,” he added. Primark’s Birmingham store is adorned with local slang phrases, and it offers locally inspired products made solely for the branch. 

It could become a bit more of a destination, which helps to increase dwell time and leverage the retail offer

Property consultant

With this site, Ikea will attempt a new approach, and property sources agreed that its decision was ultimately a self-interested one.

“It’s been trying to find big space in London for a long period of time and has been unsuccessful in doing so,” said one property agent. “It’s an innovative way of getting control of land and is a means of getting a strategic representation in inner London, where it is difficult to get the planning consent, and the amount of space and control.”

Nevertheless, its impact on the surrounding area’s currently underdeveloped high street could be significant, and creates a blueprint for further locations across the UK in need of rejuvenation.

One property consultant told Drapers: “It’s only positive news for Hammersmith, which has always been a convenience location rather than a shopping destination, because of its population density and the fact it’s a big transport interchange. It could become a bit more of a destination, which helps to increase dwell time and leverage the retail offer.”

Another source agreed: “Hammersmith never really took off, but, if the right space is available and the critical mass of customers can be proven, there are brands that would relook at taking stores.”

Taking control

The response from local residents and businesses has been encouraging, said Stephen Cowan, leader of Hammersmith and Fulham Council: “Residents are very excited. It’s very good news. Kings Mall needs an awful lot of investment and what this Ikea development will do is bring in not just the money but turn that part of King Street into a destination centre. It will be something never seen before in Britain, and Ingka Centres wants to work with local residents and businesses to achieve that.” 

However, Although the model seems suited to Hammersmith, where there is a high population of young renters – who  are likely to be attracted by Ikea’s proposition and will drive footfall to the scheme – some questioned whether this will be the case across other regions in the UK.

“Affluent London suburbs with smaller shopping centres are ripe for fashion brands to get more exposure,” points out a property investor. “But can you extrapolate this across other regions in the UK? There’s a possibility that everyone may be reading too much into it.”

Affluent London suburbs with smaller shopping centres are ripe for fashion brands to get more exposure

Property investor

Yet other property sources report that retailers have shown early signs of receptiveness, and are encouraged by the prospect of a retailer landlord who would “understand the importance of efficient service charges, good branding and services”.

“[As a retailer’s property arm], they tend to have a much longer time horizon, and aren’t looking to create a performance advantage over a short period to sell it on again,” explained one property consultant. “Therefore, they tend to take a longer-term view and may be more open to more creative deals.”

Another agreed: “It’s too early to say how they will present themselves as a landlord, but how they work with tenants may be a salient lesson to the landlord side of the market of a retailer’s view of what leasing should be.

“It’s a very well capitalised, family-run business. If they don’t get it right the first time, they will adapt it and get it right the second time, so this will be a really interesting experiment.”

The Drapers Verdict

Ikea’s proposed model for Kings Mall could provide an interesting path for the regeneration of UK shopping centres and high streets. By listening to local stakeholders, it seems that the Swedish retailer’s investment will help differentiate its chosen areas and regenerate them as retail destinations.

Ikea is making the most of bargain prices in the crisis-hit retail property market. The result is a landlord that could provide a good partner for fashion retailers who are battling against high rents and outdated deals.

The model is a welcome innovative approach for underwhelming shopping centres across the UK, and one that fashion retailers should keep an eye on. 

 

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