A report on Westfield's Stratford City Mall in London's Evening Standard 2 days ago indicated that the company would be setting aside 10 per cent of its space to smaller, cutting-edge independent retailers of the kind commonly found in London's East End. The mall, which is due to open late next year, would also have a permanent art gallery.
The idea of setting aside a certain amount of space for independents is a novel one and is consistent with the need shopping center developers have to be constantly seeking freshness. For that reason alone it should be applauded. The only way they will accomplish this is to liberate themselves (and us) from their slavish devotion to chain stores.
But by explicitly naming a per cent of space allocated to independents, Westfield needs to mind out it doesn't get hoisted on its own petard. Small independent retailers, no matter how good they are, don't usually go into regional shopping centers because the rental structure is out of whack with their financial models. In Australia, for example, a small retailer operating with a net profit margin of 3 per cent on a suburban strip would go under in a regional center.
The only way to get a lot of independents into regional centers then is to offer them below-market rental rates. Is this what Westfield will be doing in Stratford City? And if it works there, why not here in Australia?
Some bright spark in the planning bureaucracy is one day going to come up with the idea that there should be "affordable retail space" set-asides in shopping centers just as there are in affordable housing schemes. You know, where a residential developer has to allocate a percentage of units to low-income families. Can you imagine a planning regime that says to a retail developer -- "you have to allocate 10 per cent of the space at your proposed shopping center to independent retailers at 50 per cent of the market rate and another 10% at 75% of the market rate, or you don't get your building permit."
Whoah! Think that's a bit far fetched? Think again.