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UK Shopping Centre Development Limps On
4 Apr, 2011, London
Shopping centre development in the UK remained subdued in 2010 with the lowest annual provision increase for 16 years, according to a report from Cushman & Wakefield. Five new schemes and six extensions opened, adding just over 227,000 sq m of new shopping centre space. This represents a marginal decline on 2009’s development total of around 235,000 sq m. Extensions and redevelopments to existing schemes accounted for 45% of total new space.
In its UK Shopping Centre Development report, the global real estate adviser warns that development is expected to continue at a restrained pace in 2011, with a sharp slowdown in activity predicted for 2012.
Just over 260,000 sq m of new shopping centre space is scheduled to open in 2011. Whilst this represents a 15% increase in development relative to 2010, the pipeline figure is skewed by the 176,500 sq m Stratford City scheme in London, on which construction began prior to the economic downturn.
Only 53,000 sq m of new space is scheduled for completion in 2012. However, reliable forecasts for more than 12 months into the future are difficult as many developers do not comment on the status of their projects. With the exception of Land Securities’ Trinity Leeds, due in 2013, and the Tesco centre in West Bromwich, scheduled for next year, no major projects have begun construction in recent months.
As of January 2011, total shopping centre provision in the UK stands at nearly 16.2 million sq m across 695 schemes. Gross Lettable Area (GLA) per 1,000 of the population stands at 260.6 sq m, up slightly from 258.7 sq m in January 2010 – well above the EU-27 average of 235.4 sq m. The largest centre is the MetroCentre in Gateshead which is now over 190,000 sq m.
Notable schemes which opened in the UK in 2010 include: The Rock in Bury (50,000 sq m); the extension of Eldon Square in Newcastle-upon-Tyne (38,000 sq m); One New Change in London (nearly 20,000 sq m) and St Catherine’s Walk in Carmarthen (26,000 sq m).
Toby Sykes, Partner – Retail Services, Cushman & Wakefield said: “There is great potential in the current retail development market. The lack of supply of new retail space, coupled with strong demand from leading retailers, is a real opportunity for landlords. They must however, build to requirements and avoid oversupply. From our experience leasing Trinity Leeds for Land Securities at present, it is clear to us that there is considerable demand for the right development product.”
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. The limited supply of new space coming onto the market should support prime rental levels going forward. Work on Trinity Leeds restarted in August, and other projects that were put on hold during the economic downturn may be resumed to meet demand for new space.”
Shopping centres due to open this year include: Westfield’s Stratford City (176,500 sq m); Trinity Walk in Wakefield (46,500 sq m) and the Parkway in Newbury (25,000 sq m). Only one centre is scheduled to open in 2012: the Tesco Centre in West Bromwich (53,000 sq m).
Investment activity continued to pick up in the last six months of 2010. More than 20 shopping centre transactions were recorded in the second half, totaling nearly £2.3 billion. This includes six transactions over £100 million. The total transactional volume for shopping centres in 2010 amounts to more than £3.5 billion, a 70% increase on the previous year. The largest transaction was the Westfield Group’s £871.5m sale of a 50% stake in the Stratford City shopping centre to APG and the Canada Pension Plan Investment Board. Yields remained stable across all shopping centre categories in the second half, with the prime regional yield ending the year at 5.5%.