After months of standoff, property developers Westfield and Hammerson have agreed to work together to develop Croydon town centre. Caroline Parry finds out about their plans.
When it comes to unexpected retail partnerships, Croydon is out in front at present. The joint venture forged in January by previously rival developers Westfield and Hammerson for the £1bn redevelopment of the town’s Whitgift and Centrale shopping centres seemed as unlikely as a collaboration between Tesco and Sainsbury’s.
The two developers had been stuck in a state of deadlock for months over who was to take control of amalgamating the two centres to create a new development in the town.
After months of feuding, Croydon Council, local businesses and the property industry breathed a collective sigh of relief when the pair agreed to form an alliance, rather than allow their wrangling to stymie what many say is much-needed regeneration of the area.
Considering that the prize is control - albeit now joint control - of London’s next landmark shopping centre, which has a catchment of around 2.5 million people with good accessibility and transport links, it is easy to see how pragmatism prevailed.
There was no defining moment that led to the joint venture forming, says Westfield director of development
John Burton. He explains: “We were both incurring significant costs, we both wanted similar pieces of land and that was beginning to cause frustration in the local community.”
He adds: “Neither of us had significant control and if we had carried on we might have eliminated the possibility of any development in Croydon at all, and frustrated each other until we went mad.”
Striking a deal
That is not to say that the link-up was driven by entirely selfless motives. Concerned that the stalemate between Hammerson and Westfield would effectively put paid to any regeneration, Croydon Council took strong action late last year and told both sides to find a solution or face a “beauty parade” that would let the public decide.
The council would have asked both companies to present their plans to the public and allowed them to vote on which they preferred.
Speaking when the joint venture was announced, council leader Mike Fisher said: “We had been in discussions to overcome the deadlock over the Whitgift Centre, and were seriously considering intervention if the impasse could not be overcome. We’re pleased that the developers have listened to our concerns and have come together in the best interests of Croydon. The council’s aim has always been to ensure that the redevelopment of the Whitgift Centre was resolved as soon as possible.”
A 50/50 joint venture company has now been formed, which, in time, will have its own name and team but for now will deploy executives from both businesses. Westfield will oversee the design and management, while
Hammerson will continue to asset-manage Centrale, any further acquisitions made during the process and the completed centre.
Following the deal, the developers now each own a 50% stake in the £115m Centrale centre, which Hammerson acquired two years ago, and the joint venture company will acquire a 25% stake in Whitgift, following the completion of Hammerson’s conditional acquisition agreement with Royal London.
Work has now begun on what Burton describes as “tweaks” to Westfield’s plans for a covered shopping centre, which will now be progressed instead of Hammerson’s more open-plan scheme. Burton adds that the use of space and key features in the two companies’ plans were “not that far apart”. The Westfield proposal will, however, be expanded to include the Centrale Centre, creating around 2 million sq ft of redeveloped space in total.
Ripe for regeneration
Once a major retail destination in south London, Croydon has faded in recent years, hit by the development of other centres both inside and outside the M25. Mark Disney, executive director of UK shopping centre development and leasing at agent CBRE, says: “Croydon is a victim of the polarisation of spend to the bigger centres, combined with a lack of new investment.”
It was also hit particularly hard by the riots in August 2011, with the fire that razed to the ground the 145-year-old furniture store House of Reeves becoming one of the iconic images of the riots. A year later, the town faced further woes when the 150-year-old department store Allders collapsed into administration.
Still home to a large office-based workforce and ripe for regeneration, the town has been on the radar for both Hammerson and Westfield for some time. Hammerson chief investment officer Peter Cole explains: “London has the strongest economic growth and retail demand, and there is huge potential in the south for a shopping centre of the calibre that we are proposing.”
Burton adds that, in terms of the fundamentals for shopping centres, Croydon ticks all the right boxes. He says: “We have had our eyes on Croydon for a number of years, even before we had other operations here.”
The potential to transform what will effectively amount to the whole town centre with a new retail and leisure mix is exactly why the developers had engaged in a bitter feud. As recently as last September, Hammerson responded to Westfield’s decision to submit an earlier than expected outline planning application by revealing its purchase of 25% of Whitgift, which would have made Westfield’s plans significantly more difficult.
Now, the joint venture needs to actually deliver. It is hoped that outline planning for the modified scheme will be granted by the start of March, and full planning consent obtained this year. The next step is a compulsory purchase order of some areas of land around the site, which Burton admits is the “variable in the equation”.
He explains: “We don’t know the extent of that just now. We hope by the end of 2013 or early 2014, the compulsory purchase order and inquiry will be under way. We hope to start on site in 2015.”
Partnership in practice
That is when the real challenges will begin, says Simon Morris, a director in the retail team at surveyor GCW.
He explains: “What will be interesting is how they deal with the constraints of the site, and needing to keep the town alive during the construction. It is not a brownfield site so it is different to what Westfield has done elsewhere in London, and even what Hammerson has done to some extent.”
Local retailers and businesses also hope that the scheme will work in tandem with other initiatives already running in the town, such as the Portas Pilot covering Croydon Old Town. Kez Hassan, chairman of the Croydon Old Town Business Association, is confident the new shopping centre will encourage shoppers back but is concerned it could be at the expense of those he represents.
“We are next door, but the question is whether people will venture outside of the centre,” he says. “We don’t want the entire centre to be enclosed so shoppers can’t see us from inside. We will speak to them about possibly signposting the Old Town.”
With the yet-to-be-named centre due for completion in 2018, it is hoped it will provide a variety of new retail space, including the larger units needed by modern retailers. Westfield has made no secret of its mission to bring John Lewis to the town to sit alongside Marks & Spencer, Debenhams and House of Fraser, which already have stores there.
“It needs bigger units, a more attractive environment and a new innovative experience,” says Disney.
A significantly improved leisure offer is seen as key to creating a vibrant town centre. Morris also believes it could support some smaller, upmarket retailers such as Cath Kidston.
Some local scepticism remains about whether Hammerson and Westfield can really put their differences behind them for the good of the scheme, although Burton is clear that a deal would not have been contemplated if the companies did not believe the venture was workable.
Hammerson and Westfield have a track record in creating attractive environments that offer retailers opportunities. Now the hope is their combined effort can ensure Croydon is a place retailers will be queuing up to be part of.