The Ikea retail empire has bought a west London shopping centre, the first project in its multibillion-euro strategy to develop mixed-use sites around urban Ikea stores.
Ingka Centres, the real estate division of Ikea’s parent company Ingka Group, said on Thursday it had acquired Kings Mall in Hammersmith. It expects to spend £170m from its cash pile on the purchase and redevelopment costs.
It will install an Ikea store at the 27,000-square-metre shopping centre, which it has bought despite a steep downturn in the UK’s retail property market as consumers move online and retailers battle with high costs.
The UK has been at the forefront of retail turmoil that has spooked property investors. Transaction volumes in the shopping centre sector hit a 24-year low of about £1.1bn last year, according to the property agents Savills.
Gerard Groener, managing director at Ingka Centres, said the purchase would be the first in the company’s new strategy to develop mixed-use urban sites around new Ikea stores, as opposed to its traditional out-of-town warehouse outlets.
Ingka Centres hopes to spend about €1bn a year on such sites globally, he said, alongside heavy investment in China and India. The city centre push forms part of the broader group’s reinvention as it seeks to adapt to changing consumer habits. This also includes investment in its digital offering.
The Swedish company already has a handful of city-centre stores, including in Paris and Moscow, but unusually for the Ikea parent these are leased, not owned.
Mr Groener said that along with opening an Ikea anchor store in spring next year, the company would redevelop parts of the Hammersmith shopping centre for uses other than retail. The mall’s current occupants include H&M, Primark and Sainsbury’s.
“We want to create meeting places which are much more than just a shopping centre,” he said. “If we were to stick to a functional, retail-only location, that would create a challenging investment. But we want to put much more into this place than just retail.”
He said options for additional uses would include offices, housing, entertainment, restaurants and bars, and education, but that further decisions would be made following a consultation with local people.
Ingka Centres bought the site from the UK Real Estate fund run by asset manager Schroders, which acquired it along with a neighbouring office building for £153m in 2015.
After its toughest year in decades, the UK shopping centre market is showing signs of life. Private property investors Bruntwood spent £22.5m this month on two shopping centres in a joint venture with a local council in Manchester. Mark Garmon-Jones, director of UK investment at Savills, said this was the first shopping centre portfolio to trade in four years.