By Brian Lavery, Managing Director, CBRE NI

Shopping centres have been part of our lifestyle in Northern Ireland since the 1970s, playing a critical role in the retail market and society at large. They helped create modern-day town squares sheltered from the elements and became vibrant gathering places for shopping and other entertainment experiences.

Before the property crash of 2007, they were the darlings of pension funds, with property companies – and indeed many local authorities – investing heavily in the sector.

Over the last 20 years, however, the shopping centre has been under severe pressure, not least in Northern Ireland, largely through the loss of major anchors such as Dunnes Stores, Debenhams and BHS.

The closure of major department store doors and shifting consumer behaviour, together with the growth of online shopping, have significantly impacted our shopping centres across Northern Ireland. High operating costs due to the physical nature of the centres requiring heat, light and security have also become a major challenge for shopping centre owners and retailers alike.

The malaise has not been restricted to department stores, as a quick check of administrations reveals a number of major brands all in trouble and undergoing some sort of reorganisation or complete collapse since Covid. These include TM Lewin, Sofa Workshop, Joules, Peacocks and Jaegar, Laura Ashley, Oasis, Monsoon, Accessorize, Arcadia Group, The Bodyshop, Ted Baker, River Island and, most recently, Pizza Hut. That is a somewhat conservative list of retailers that have had problems and who, historically, would have filled our shopping centre spaces.

The trend is not restricted to Northern Ireland, with the sector across the UK and Europe – and the iconic malls of America – having experienced major problems over the last couple of decades.

Retail has had a healthy history in Northern Ireland, with many accrediting that to the low cost of living and a general propensity of the Northern Ireland public to go shopping. In the 1970s, 80s and 90s, the demand for retail space was almost seen as insatiable, which resulted in not one but two shopping centres cropping up in many of our cities and regional towns. Did we need this? And did we ever really need two factory outlet centres to serve Northern Ireland?

The last five years have seen some repositioning of our shopping centres, with a number of private investors having taken the leap into investing in what was previously a market that may have been too large a ticket. Values have generally dropped to approximately a third or even a quarter of what they would have traded at prior to 2007.

The supply tap on shopping centres was halted in the early 2000s and, indeed, a number of centres have closed over the last few years.

Those shopping centres that have survived and are now starting to bounce back are filled with retailers who have figured out how to operate in a market where you have both physical stores and online shopping. Importantly, they have realised what to offer their customers to make their physical presence work.

Our most recent investors have not been frightened to reposition the large anchor stores within the centres as either leisure or F&B offerings, with many having widened the attraction of the shopping centre by adding further F&B offerings on the site and, in some cases, creating a further retail mall external to the enclosed centre.

The new owners have also restructured many of the leases in the centres they have bought. There is no point ignoring where retailers are going out of business – you still have to work with the existing and the current retailers to reposition and bring in new retailers or leisure uses that will be complementary and draw footfall.

Whilst we would anticipate that more retailers will eventually go out of business in 2026, it is a cyclical-natured business and more will establish themselves and develop into well-run centres.

It will be interesting to see whether our centres can thrive and reinvent themselves under the stewardship of local owners, and whether we will see institutional capital flow back into this sector as it did 20 or 30 years ago. If that happens, the local investors who have had the foresight will see steadily increasing values and a very satisfactory end game to their gamble on this sector.

This piece was originally published in The Irish News.