M&S poised to pull plug on shopping mall plans
STORES giant Marks & Spencer may abandon dozens of building projects across the country worth hundreds of millions pounds, according to property sources.
The developments include shopping malls, town centre regeneration projects and the construction of accommodation to help ease chronic housing shortages.
Pulling the plug is likely to put the retailer at loggerheads with councils as many of the schemes are backed by public money and are crucial to local development plans. The projects could create thousands of jobs.
Several senior property sources estimated t hat M& S could be involved with up to 60 building projects of varying sizes.
Despite recent woes, M&S is still Britain’s largest high street retailer with more than 900 shops and it is widely regarded as an ‘anchor tenant’ whose name and support is key to attracting other retailers and investors. Therefore, if it backs off, it could be damaging or even fatal to a scheme.
Marks & Spencer has already said it plans to close about 30 underperforming or marginal stores. It is also slowing down its plans to open new ones.
However, as part of a drastic overhaul under new chairman Archie Norman, M&S has embarked on a review that goes much further and could see it ditching plans to participate in developments where work is already under way.
Property sources sounded the alarm after M&S recently pulled out of a £ 100 million project in Rochdale, Greater Manchester.
Rochdale council chief executive Steve Rumbelow hinted that legal action against M&S is a possibility.
‘As far as the council is concerned, Marks & Spencer has a legally-binding agreement to take space in Rochdale Riverside,’ he said.
‘They negotiated a deal as a key anchor tenant and committed to it knowingly and willingly. Marks & Spencer should be under no illusion that we expect them to fulfil their legal obligation to Rochdale and the new retail scheme.’
The planned development will house 25 shops, restaurants and cafes and it could create more than 1,000 jobs.
There are local reports that other M&S projects in the area are in grave doubt – including Chorley and Morecambe further north.
M&S said ‘talks are ongoing’ with Rochdale and that it has made no decisions on other developments.
However, one senior property industry source said: ‘M&S is going back to the drawing board and looking again at sales projections over the coming years given the changing retail environment.
‘Once that is complete they will decide which projects to go ahead with. You could expect to hear about that as soon as January.’
He added: ‘If you can get M&S in everything falls into place from there. So you can imagine that could go into reverse if they turn round and pull out again.’
Another property industry source estimated that M&S could ditch as many as half of the developments it had been considering.
‘It doesn’t take too much reading between the lines to realise that Brexit, the cost of imports and rising inflation are squeezing profit margins,’ he said.
‘Turnover is steady and it is still attracting shoppers. But M&S will be asking for much improved terms on deals. For developers that could be t he straw t hat breaks t he camel’s back.’
He added that if M&S drops out, developers would try instead to sign up more downmarket chains such as Aldi, Lidl and Iceland.
An M&S spokesman described estimates of projects affected as ‘rumour and speculation’. He added: ‘As part of our transformation programme, we are reviewing potential store openings and will only proceed with sites that will deliver the highest returns. We will provide an update when the time is right.’