UK Shopping centre development remains sluggish
The slowdown in UK shopping centre development is expected to worsen according to a report from property consultant Cushman & Wakefield.
Just 46,500 sq.m of new shopping centre space was added to the market in the first half of 2011, with the opening of Trinity Walk in Wakefield in May.
More than 217,000sq.m of shopping centre space is due to open in the second half of the year, which brings the projected 2011 completion total to nearly 264,000 sq.m. Although 12% higher than the 2010 level, this figure is massively skewed by Westfield Stratford City, which at 176,500 sq.m accounts for 81% of the pipeline for the second half of the year and 67% of the projected 2011 development total.
Apart from Stratford City, only two new schemes are scheduled to open in the second half of 2011: Parkway in Newbury (27,400 sq.m) and the retail element of the mixed-use Cube scheme in Birmingham (7,100 sq.m). Bluewater and Meadowhall are also being extended, with the Bluewater Events Venue and the revamped Oasis Dining Quarter scheduled for completion before the end of the year.
On 1 July 2011, total shopping centre floorspace in the UK stood at nearly 16.5 million sq.m across 698 schemes, whilst Gross Lettable Area (GLA) per 1,000 inhabitants was 264.5 sq.m. Shopping centre density in the UK is above the EU-27 average of 240.3sq.m per 1,000 inhabitants and in line with the EU-15 average of 262.8 sq.m per 1,000.
Completions are expected to slow dramatically next year. The Tesco shopping centre in West Bromwich (53,000 sq.m), originally scheduled for completion in 2012, has been delayed to 2013. At present next year is expected to see the lowest annual provision of new shopping centre space in the UK for more than 50 years.
Activity should pick up in 2013, with Trinity Leeds (93,000 sq.m), on which Cushman & Wakefield is letting agent, and a handful of other projects under construction and several others at the planning stage. However, activity is unlikely to match the levels seen in 2005-2008.
Overall, occupiers remain cautious; retail sales have been sluggish this year, strong annual growth in January and April notwithstanding, and several high-profile players entered into administration in recent months. However, selected retailers are expanding, and demand for space in high-quality, regionally dominant schemes is still strong.
Toby Sykes, Partner – Retail Services, Cushman & Wakefield, said:
“We predict an upswing in development activity towards 2015. The key for developers is not to oversupply and to ensure that new space is designed to meet specific retailer requirements. There is definitely more of an appetite for development in the market. In the meantime we are advising more landlords on refurbishments and extensions on existing schemes to satisfy market demand and improve tenant mix.
“The strength of the casual dining market is also providing landlords with the opportunity of extending and improving catering facilities within their centres to increase shopping hours and total pedestrian flow. Recent examples of catering improvements within schemes that Cushman & Wakefield has advised on include; Bullring, Bon Accord in Aberdeen and Cribbs.’
Kristina Gorkovskaya, Research Analyst in Cushman & Wakefield’s European Research Group, said:
“Whilst current data shows that completions will come to a virtual standstill in 2012, demand for prime retail space remains resilient; indeed, it has been reported that Stratford City opened 95% let. The limited supply of new space coming onto the market should support prime rental levels going forward, although further polarisation between prime and secondary schemes looks likely.”
Investment transactions totalled nearly GBP3 billion in the first half of 2011, a 32% increase on the previous six months and 129% up on the corresponding period of 2010. A total of 30 shopping centre transactions were recorded, including five over GBP100m. However, the volume figure is skewed by Capital Shopping Centres’ GBP1.6 billion acquisition of the Trafford Centre in January, the largest single-asset property deal ever recorded in the United Kingdom. Yields remained stable across all shopping centre categories in the first half, with the prime regional yield ending the year at 5.5%.