Project to transform former M&S store into flats to cost £5.5m
PUBLISHED: 19:00 23 November 2019
Confidential documents prepared for planners reveal that proposals to transform Felixstowe's empty M&S store will cost around £5.5million - and only yield around £3.5m.
The analysis was drawn up on behalf of developers Occidental Ltd to try to explain why the project cannot afford to include social or affordable housing.
East Suffolk Council (ESC) has still not decided whether or not to permit the plans to halve the shopfloor space of the store in Hamilton Road and allow 16 flats to be created on upper floors.
Occidental's timetable for the project expects to gain planning permission next month and for a start on site next September.
Felixstowe Town Council has expressed its disappointment at the omission of affordable homes from the project, which would be against policy.
Affordable Housing 106 has submitted a financial viability statement to the council to explain the costs involved and concludes that it is "not viable for the applicant to provide any affordable housing within the proposed development or to make any financial affordable housing contribution to the council."
The company said: "We have therefore factored in a 20% Profit on Gross Development Value allowance to reflect a competitive return to the developer for the delivery of the proposed scheme. The proposed scheme assuming no affordable housing contributions generates a deficit of £2,357,659 assuming a profit return of 20% of GDV."
The renovation project is expected to cost around £3.4m and the building £1m, plus professional fees, interest, CIL contributions and sales and marketing costs.
The main income will be from the 16 flats, which are expected at current prices to sell at between £150,000 and £190,000 each, raising £2.78m.
The premises in Hamilton Road have stood empty since April after Marks and Spencer closed the store after 80 years.
Community leaders and residents waged a campaign to try to persuade the company to keep the shop as a food only outlet but it said closure was "the right commercial decision".
Occidental Ltd's plan would see the ground floor commercial space reduced from 578sq m to 311sq m, with extensions and conversions to create two studio flats, eight one-bed and six two-bed apartments.
Documents submitted to ESC say 16 employees would work in the shop compared with 30 previously.
There appears to be no chosen end user yet. The premises remain for rent for £130,000 a year with business rates of £40,824.
Architects Barefoot and Gilles said: "The starting point for the design was to revive underperforming accommodation, the current configuration of which is no longer in demand."
Agent ECE Planning Ltd said the M&S upper floors had been underutilised while the revamped shop space will still be larger than most of the town centre units.
A retail report by property agent Fenn Wright said there was limited demand for larger retail units in the region and smaller retail units with limited ancillary areas are vastly more desirable than larger stores.
ECE said: "Changes to the supply chain and 'just in time' systems mean that many retailers do not carry the same amount of stock they once did. Fenn Wright note in their report that, in their experience, smaller retail units with limited ancillary areas are vastly more desirable than larger stores. The overheads are substantially reduced, but still offer the presence that retailers desire, particularly when linked with an online connection via click and collect.
"The report concludes that a reduction in the retail and ancillary floorspace will be very likely to increase the prospects of achieving a letting for a retail use which will in turn help reduce the amount of time the unit will remain vacant for.
"In light of the above, it is considered that the proposed reduction in retail space will have no harmful impact on the viability and vitality of the town centre and is in fact likely to have a beneficial impact as a result of the retail unit being more desirable to the market due to its size.
"The benefits of the proposal will be further maximised as a result of the increased footfall from the residential component of the proposal."