I've never been convinced by Friars Walk... but now I'm worried

In November 2013 I was approached by the South Wales Argus to supply a commentary piece on why I thought taking out a £90m loan to fund Friars Walk was a bad idea. I'm a nobody, so I suspect I was the only person they could find prepared to voice their opposition to such an idea.

My reasoning was simple. Friars Walk was the wrong thing at the wrong time. In a city which is economically depressed, employment and ways to earn money is what we need, not ways to spend it. And the fact that nobody from the private sector could be found to take the financial gamble suggested it probably wasn't the safest bet anyway.

On 26th November Newport City Council voted overwhelmingly to a deal that would see the city borrowing £90m which it would them loan to Queensbury to cover the cost of construction and fit-out of the development. This loan would be paid back at a commercial rate of interest.

On Nov 12th 2015 Friars Walk opened to much celebration from local media, politicians, and indeed the city as a whole, almost all of whom viewed the development as Newport's salvation around which a city-wide regeneration would arise.

That was then, this is now.

Today (29th June 2016) just seven months after Friars Walk opened its doors, the surprise news has broken that a proposed sale to Talisker Corporation - a Canadian real estate and management company - has fallen through. This has potential serious implications for the city that the Council (and indeed local media) appear to be downplaying, and we need to return back to November 2013 to understand why.

A news report in the Telegraph & Argus at the time revealed that...

"If Queensberry couldn’t pay back the cash the council could take the scheme over and sell it on or re-finance it. The firm has until 12 months after completion to repay the money – by June 2017 at the latest. But if it can’t refinance it or sell it, the council could be faced with costs of between £4 million to £7 million to fund the borrowing."

If such a situation were to transpire this would be extremely serious for a city already trying to balance the books following government cuts to its budget (Newport City Council has had to make £11 million in cuts in 2016 alone). Even at the optimistic figure of £7 million a year (not including interest), it would be 12 years before the Friars Walk loan is paid off. At the lower rate of £4 million we would be looking at over 22 years.

The press coming out of Queensbury/Newport City Council today is predictably blase about the deal falling through, with plenty of 'speaking to others', as if it's not a problem.

But it IS a problem, and the harsh reality is that finding a buyer in the current climate will be EXTREMELY difficult. The only way Friars Walk will attract a buyer is if it is an overwhelming commercial success.

So how successful is Friars Walk, and how bright or otherwise is its future?

To answer the second question first, and without even factoring in post-Brexit uncertainty, the future for shop retail isn't looking good. Experts are predicting a significant decline in the fortunes of brick and mortar retail that will be comparable with recession. At the same time online retail is coming to dominate the landscape to such a degree that John Lewis has already revealed it expects its online sales to overtake store sales by 2018, and has invested £500 million in preparing itself.

John Lewis you will remember is a direct competitor of Debenhams, which provides the anchor store for Friars Walk. It's safe to assume they share the same future vision for their businesses.

Internet retail is hitting certain types of retailers hardest, and is changing the face of retail. Women's clothes stores in particular are suffering as women become more comfortable with the convenience of online shopping, and according to the Local Data Company (the UK's retail experts) women's clothes stores are closing faster than any other type of High Street business. Women's clothes shops make up a sizeable percentage of outlets in Friars Walk.

[As an aside, the types of businesses doing well in this brave new world are barbers, mobile phone shops, tobacconists, hair & beauty salons, nail salons, and health clubs.]

Shopping centers in generally, like high streets, aren't particularly thriving. Latest data shows footfall is 9% down on high streets in the last five years, 3% down in shopping centers, and 5% up in retail parks. Evidence of this can be seen by the ongoing success of Newport Retail Park in Spytty.

With regards to the success of Friars Walk, we only have the PR and the number of units let on which to judge.

In May 2016 Queensbury proudly announced that 'more than five million shoppers have visited Newport's Friars Walk since it opened to the public six months ago.' Impressive figures indeed, but can we believe them, or is this merely an over-egging of the PR mix intended to attract a buyer? The PR surrounding Friars Walk has been nothing if not bullish and glaringly optimistic since the start.

To put that figure of five million shoppers into context, it would mean over 27,300 shoppers visiting the centre seven days a week since Friars Walk opened. On the times when I have visited I felt it hard to believe such a consistently high number was being achieved or sustained, but of course that is just my observation and opinion.

With regards units let, according to the leasing plan on the website, Friars Walk still has 19 vacant units awaiting interest. This is a significant proportion. So clearly the centre is finding it hard to achieve anywhere near full occupancy.

And of course if we are to judge Friars Walk on its attractiveness to potential buyers, we MUST consider the wider picture within which it sits - the surrounding city centre, the purchasing power of the local population, and whether it is capable of attracting outside visitors. With regards this last point, as a classic 'Clone Town' development it is certainly not attracting people from Cardiff or further afield, for why would you travel to Newport's Debenhams when you have a bigger one in Cardiff? This is the widely understood weakness and failure of Clone Town developments.

So when you look past the spin and the protective shield of optimism surrounding Friars Walk, it doesn't look so much of a good opportunity for potential buyers. The people of Newport's fondness for Friars Walk isn't enough to warrant a buyer spending upwards of £100 million on it. It needs to be a proven success and a good investment, and unfortunately for the people of Newport, it doesn't look like it is.

I don't wish to speculate on the likely reasons talks with Talisker Corporation collapsed. But they did and there is now a very real chance that Friars Walk could cost us all dearly in the very near future. I genuinely wish and hope that it doesn't, but I am deeply worried.