London: Down-at-heel shopping centres and out of town discount stores are experiencing surging sales in spite of the economic downturn as consumers turn bargain hunters to keep costs down.

Shopping centres and high streets that host discount retailers are faring well, according to property owners, in spite of widespread gloom across the retail sector.

The strong performance in budget retail runs counter to the trend in the wider British market, which has experienced a rising number of retailers going bust and growing vacancies among many high streets and centres.

Retail sales values fell 1.8 per cent on a like-for-like basis in February. However, St Modwen, which owns a number of dated shopping centres, said trading was holding up well across its portfolio. Even shops that recently became vacant have been quickly filled with new tenants.

"Our portfolio is mostly secondary quality but it is letting up incredible well," said Bill Oliver, chief executive, who added that keeping rents lower had given it an advantage over newer centres positioned for more affluent consumers.

The company had four stores empty after the demise of Woolworths. Three of these have already been relet to discount retailers such as Wilkinsons and Poundland, which are still looking to expand as consumers tighten their belts.

In spite of paint peeling from the facade of its Elephant and Castle shopping centre in London, business is booming. Rents have been struck at a record £50 per sq ft to budget chain 99p after a bidding battle.

The centre has only three empty units out of its 80, although many would struggle to recognise retailers such as Pricemark ("Top Brands - Bottom Prices"), Footchain, Pricebusters and Just Beds. Elephant and Castle was scheduled for demolition last year but has a new lease of life, according to St Modwen’s Tim Seddon, who says there are plans to decorate and improve surroundings.

Nick Symons, director at Savills, the property consultancy, said: "There are some secondary retail schemes that have capitalised on the current climate by [targeting] discount/value retailers such as Primark, TK Maxx, Wilkinson."

He said examples included the Mall in Southampton and the Pentagon Centre in Chatham, while others such as the Merrion Centre in Leeds have been propelled by discount brands that compliment prime fashion outlets.

Symons said while there was an increase in the success of some secondary centres, it tended to be location specific rather than a blanket trend.

It is not just the budget end that is benefiting from bargain hunting among consumers.

Value Retail, which owns designer discount outlet centres across Europe, including Bicester Village, said trading is ahead of budget. The centres offer discounts of up to 70 per cent on designer clothes.

Chairman Scott Malkin, the US entrepreneur who introduced the concept to Europe, said like-for-like sales were up 10 per cent on a year ago, and that excluded last year’s Easter trading boost.

"We are about value for money [at a high price point] rather than discount. There is a big theme towards guilt-free shopping." Others are capitalising on the trend among the "nouveau poor", a phrase that captures those still wanting to look good but more likely to be dressing on a budget.

Henderson, the fund manager, owns a number of outlet centres. From January to March 22 2009, it says like-for-like turnover was up almost 4 per cent, with footfall even higher, close to 7 per cent.

By comparison, footfall for traditional non-food retail was down 0.8 per cent in the period, it says.

Three month-weighted average national sales turnover from December to the end of February was down 5.3 per cent.

McArthurGlen’s designer outlets are also defying the struggling retail market, with first quarter sales up on last year.

Sales at the group’s seven centres are up by more than 5 per cent compared with the same period last year.

York and Cheshire Oaks designer outlets have seen sales rise by 13 per cent and 10 per cent respectively.

By Daniel Thomas, Financial Times Published: April 20, 2009