By Anna Ringstrom

STOCKHOLM (Reuters) – IKEA said on Thursday it would invest £1 billion ($1.4 bln) in London over three years, as it opened the doors to its first high street IKEA store in Britain, anchoring its first-ever inner-city mall, in the capital’s Hammersmith district.

IKEA, a company known for large out-of-town warehouse stores is currently undergoing a shift to smaller locations in inner cities and more digital services, as it adapts its business model to meet new shopping trends.

Ingka Group is the global owner of IKEA shops and IKEA-anchored shopping centers across Europe, Russia, China and other countries. In 2019, the group opened its first new inner-city stores in Paris.

On Thursday, the Hammersmith mall and store opened and announced its plans to invest in London.

It stated that it will use London as its test bed for innovation and would develop and trial new formats and other initiatives.

Ingka Group stated that in London, the Autumn of 2023 will see the opening of its next IKEA shop in inner-city areas. This is on Oxford Circus. Ingka Group bought the iconic building in 2021.

Cindy Andersen of Ingka Centres’ malls subsidiary said that the Hammersmith mall was currently fully let. There had been a 25% vacant space when Ingka purchased it in late 2019. This is despite a downturn in commercial real estate.

Ingka predicted that the mall’s “meeting spot” or redevelopment would double its annual footfall to 6 million, as compared to 2019.

Fundamentally, people believe people need to connect with others, experience new spaces and gather. She said that she was still convinced that this is what people desire.

Ingka Centres is now planning to open the second Ingka Centres location within an inner-city area. This will be San Francisco. The mall was purchased in 2020, despite very low retail sales and uncertainties caused by the pandemic.

The malls and IKEA shops of Ingka Group are now recovering from the effects of the pandemic. According to Andersen, tenant sales during November and December, an important holiday period, increased by 25% worldwide compared with a year ago, as well as up 8% compared to pre-pandemic 2019 at 1.3 billion euros.

($1 = 0.7384 pounds)