Council chiefs plan to use almost £900,000 from a town centre development reserve to support Church Square Shopping Centre this year.
St Helens Council purchased Church Square Shopping Centre for £26.6 million in October 2017.
The deal is designed to give St Helens Council greater control over town centre buildings so that it can press ahead with long-term regeneration plans, including altering the town centre layout, and influence key retailers to remain at Church Square.
Traditional shopping areas in town and city centres across the UK are facing huge pressures, with retail analysts expecting footfall at stores nationally to fall even further in 2019.
A cabinet report has revealed that anticipated rental income for 2018-19 has reduced due to a number of tenants vacating properties since the acquisition, though “this has been mitigated somewhat by three new businesses opening”.
It is understood the council is not concerned about increasing vacancy rates in the St Mary’s arcade section of the centre, as it has plans to “reconfigure” that area of the centre as part of town centre modernistation proposals.
As the council is now the landlord of the centre, it is responsible for service charge costs, business rates and insurance when units are vacated.
Additionally, the terms agreed upon for tenancy renewals since the acquisition has also negatively impacted on rental income.
The report said it is now anticipated that £480,000 will be drawn down from a specific town centre reserve in 2018-19 to support the trading position of Church Square Shopping Centre.
In addition, approximately £406,000 will be drawn down from the reserve to fund backdated rent reviews.
When the council acquired the centre a number of rent reviews had been agreed but not completed prior to transfer.
It was agreed that all pre-existing head rent payments would be waived, with the funds to be used to support the overall income position of the shopping centre.
A spokesman for St Helens Council said Church Square Shopping Centre currently operates with a trading surplus.
The spokesman said: “The value of the payment due to the previous owner was £1.4 million
“Instead of being paid to the Pension Fund, who owned the shopping centre, this was placed in a specific reserve which allows for management of the council budget in relation to the centre.
“The purchase of the centre was also to allow the council to bring forward the long-term regeneration of the town centre, which the public of the borough has made clear they expect.
“Before owning the centre, the council owned just one per cent of the buildings in the town centre and therefore had no control and no ability to influence that long-term desire for regeneration.”
The council’s rental income has also taken a hit from vacancy rates in the Hardshaw Centre, where the council has a rental share agreement in place with the landlord.
The cabinet report says this has caused a budget pressure of around £200,000.
“As vacancy rates increase within the town centre, so the amount of rental income generated reduces and the council’s share reduces proportionally,” the report said.
“This is further impacted in some instances where reduced rentals have been negotiated by the landlord to manage retailers through these difficult times and in order to attract tenants to vacant units.
“Based on the latest figures available a budget pressure of £198,000 is projected but this will be further exacerbated or alleviated by any further changes to occupancy levels”
At the end of October, there were 43 vacant retail units in the town centre’s primary shopping area, which represents 13.4 per cent of the total units (321).
Performance has deteriorated compared to the same period last year (10.9 per cent).
“It is reported to be the toughest retail market anyone has seen,” the report said.
“The current trading conditions could herald more store closures and further damage to high streets moving into the weakest trading period of the year.
“Should there be further store closures, there will be a budget pressure on town centre income in 2018-19.”
The report said there is also a £97,000 shortfall in income relating to the town’s markets, based on last year’s outturn variation, although occupancy levels are similar to the previous year.