New report: shopping centre plans ditched as UK retail sector reshapes
A new report has suggested that more than 10 million square feet of shopping centre developments planned for construction during the next five years are unlikely to be built due to the UK retail sector reshaping in the face of curtailed retailer expansion, online retailing and lower rents.
The latest Colliers International Midsummer Retail Report has identified a raft of projects that either have planning consent or are in the system which are unviable.
Colliers’ head of UK retail, Mark Phillipson, said: “On the face of it, the shopping centre development pipeline is now running at levels not seen since the recession, but the reality is that many schemes will not be viable. As the market stands, the cost of building a centre would – in many instances - be more than its end value.
“Whilst this is a blow to the promoters of these schemes, the positive aspect is that it shows how the market is responding to ‘right-size’ the development pipeline. Shopping centre schemes are progressing but they are focused on locations with wide catchment areas and strong demographics. There is also a growing trend to extend existing successful centres. The 800,000 square foot extension to Westfield London will make it the largest shopping centre in Europe.”
Of the 421 locations tracked by the research in the year to end April, 78% were found to have rents that had remained stable while another 17% saw their rents rise.
Phillipson said: “With rents only declining in 5% of the surveyed locations, the slide in prime rental levels that we have seen since the beginning of the recession is now slowing and a platform for progressive rental growth in a growing number of locations is gradually being created.”
In the year to end April, the sample locations outside of London recorded a 0.8% uplift in prime rents – the first time that they have collectively have shown positive growth since 2008. During the same period, average prime rents in central London rose by 7.8%.
Colliers said the market reports that there is good retailer demand for new out-of-town retailing space in strong locations. However, the schemes often face stiff competition from residential development.
While UK shoppers are increasingly heading out-of-town to shop, the retail landscape scene in many town centres remains a concern.
Phillipson concluded: “In dysfunctional town centres, local authorities must play a growing part of grasping the nettle and exerting co-ordinated control that can bring change. The market alone cannot sort out the legacy problems that we face. There must be a broader policy which brings vision and takes hard decisions.
“Whether it’s through formal structures such as the Town Centre Investment Zones being proposed by the British Property Federation or through pro-active management on a more piecemeal basis through planning and incentives, local authorities must have a central role in shaping the future of town centres.
“And if property remains subject to the onerous burden of business rates then some of this revenue must be re-directed to breathing new life into our towns and cities.”
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