Cherwell District Council is “undertaking a strategic review” of Castle Quay, Banbury, after wiping almost £1 million off the revenue it expects the centre to make this financial year.
The council’s latest monthly performance, risk and finance monitoring report revealed that it anticipates net revenue from the centre to be £927,000 lower than initially budgeted for, almost three times the £315,000 shortfall that was expected in July.
To balance the books, the council is setting aside up to £3.5 million from its capital budget, money that was meant to fund projects at Castle Quay, which are currently “not progressing” while the review takes place.
Presenting to the rest of Cherwell’s executive this week, portfolio holder for finance Councillor Adam Nell (Con, Adderbury, Bloxham & Bodicote) read an explanation directly from the council’s report, which cited slow and withdrawn interest in units at Castle Quay.
“In general, the tough global economic conditions and inflationary operational costs are having a direct impact on the tenant uptake of units,” he said.
“This is resulting in vacant units remaining vacant longer and therefore an increase in the vacant unit costs.
“Currently, we are undertaking a strategic review of the asset to ensure our plans for the centre remain aligned to the rapidly changing retail environment. This means that while the review is being undertaken, we are not progressing some of the projects which were previously planned.
“In addition, other alternative use projects, which were due to commence, are now being reconsidered by the potential tenants due to their own financial challenges, and therefore, potential occupation has been delayed. These delays have now been taken into account in our latest forecast predictions.
“£3.5million of previously received revenue had been set aside to fund additional capital projects within Castle Quay. The capital budget has been reviewed, and this funding is not needed for capital projects currently planned.
“These funds have therefore been released to offset the fall in revenue predicted in this financial year. So far this year, £0.927million has been transferred from one budget to the other, which means that currently, Castle Quay is on track for budgeting purposes.
“The balance of this reserve will be held to help mitigate future financial impacts.”
A council spokesperson said the £3.5million had initially been “allocated to the capital budget as a contingency measure” with its use, therefore, creating “no real shortfall in capital”, adding that “there is a revenue contingency for such circumstances”.
The strategic review “was always planned”, is currently being prepared and will be published “in due course”.
They said the projects not being progressed related to the potential alternative uses, which could not be discussed due to being “commercially sensitive”.
They continued: “Despite a tough operating context for all commercial landlords in the UK, including pressures caused by the energy crisis and weakened market sentiment in the retail sector at large, Castle Quay still generates a net income for Cherwell District Council.
“We are proactively managing the shopping centre and continue to market empty units to prospective tenants.
“The shopping centre is being well managed, and the financial impact of this forecast shortfall in income will be balanced by income from previous financial years, which has been prudently set aside for this precise purpose.
“The council will continue to back Banbury through its management of Castle Quay shopping centre and the new Waterfront development, which is putting the town on the map.”