Great food can't save malls from going extinct

LONDON • Mr Stephen Wall's restaurant chain Pho is the kind of tenant that mall landlords would love to attract.

The Vietnamese menu is right on trend, the business is expanding and it has a track record of success in shopping centres.

Yet, he thinks that even restaurants like his will not be the saviour of malls suffering from the rise of online retailing.

"Food is not the solution for most landlords. Saturation has occurred because too many restaurants are being put into shopping centres," said Mr Wall, who founded the British chain with his wife in 2005.

As competition from the likes of Amazon and Asos intensified, British malls looked to food as a way to stay relevant. People would go to the restaurants, buy some clothes in the shops while there, and the extra spending would allow the landlord to boost the rents.

Instead, food and beverage operators have been hurt over the past 12 months by rapid expansion and a consumer-spending slowdown.

Popular names like Gourmet Burger Kitchen, pasta place Carluccio's and the Jamie Oliver chain, often found at big malls in London or Manchester, have been among those suffering.

Food is not the solution for most landlords. Saturation has occurred because too many restaurants are being put into shopping centres.

MR STEPHEN WALL, who founded British chain Pho, which sells Vietnamese food

Nationwide, the number of restaurants going insolvent rose 24 per cent last year, compared with 2017.

A combination of increased competition, rising food costs because of the pound's weakness after the Brexit vote and a government apprenticeship levy have hurt operators. Many brands are very similar and consumers cannot differentiate among them in any way other than price, said Mr James Child, a retail analyst with EG.

Food and drink operators took 13 per cent of newly leased space in shopping malls last year, the lowest level in at least six years, according to Radius Data Exchange.

A year earlier, it was 20 per cent.

One big problem is that the malls are competing for diners with downtown areas, which offer many more attractions. In London's West End, you are feeding people who are there for work, the theatre, shopping or just wandering around, said Mr Brian Bickell, chief executive at Shaftesbury.

Malls, by contrast, offer far more capacity than there is demand, according to Mr Ewan Venters, chief executive at Fortnum & Mason, the upmarket retailer which recently opened a dining area in the Royal Exchange, a small luxury mall opposite the Bank of England.

"The whole thing of the 'experience economy' came in. You're not just trying to sell to people. You are trying to entertain them," he said.

"It all happened very quickly in malls and, suddenly, there was too much capacity and not enough people to eat breakfast, lunch and dinner in these vast places. I'm not surprised they are cutting back now."

Mall landlords may do well to take a step back and draw inspiration from other types of locations, said Ms Sue Munden, an analyst at Bloomberg Intelligence.

"One of the problems is that landlords have not taken enough care in the curation of the space," she said.

"Mixing locally-inspired offers with some known brands might be a more successful strategy."

Shopping centres are not getting much relief from their traditional tenants either after a year of struggle and it may only get worse. Brands such as Debenhams, Marks & Spencer Group and New Look have already vowed to close stores.

A dismal Christmas performance could accelerate the trend and add more vacancies for landlords.

To succeed, malls will need to add hotels, apartments and leisure attractions, helping to create mixed-use neighbourhoods, said Mr Des Gunewardena, chief executive of restaurant group D&D London.

"That's the future," he said. "Shopping malls are not going to be saved by casual dining chains."

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A version of this article appeared in the print edition of The Straits Times on January 28, 2019, with the headline 'Great food can't save malls from going extinct'. Print Edition | Subscribe