UK Shopping Centre Development Pipeline Dries Up
13 Oct, 2010, London
The number of new shopping centres being completed in the UK this year is likely to fall by around 40% below the 10-year annual average, according to new research from Cushman & Wakefield. Just 80,000 sq.m of shopping centre gross lettable area (GLA) was added to the market in the first half of 2010.
The second half of the year is expected to see the completion of a handful of small- to medium-sized schemes, pushing the total completed GLA for 2010 to around 215,000sq.m. This would represent a 1.3% increase in total stock on 2009, the second lowest annual increase in provision recorded in the UK in 17 years.
In its latest UK Shopping Centre Development report, the global real estate adviser warns that development activity is likely to remain subdued for the foreseeable future. Approximately 135,000 sq.m and 260,000 sq.m is due for completion in the second half of 2010 and 2011 respectively. Nonetheless, it has been announced that work will begin on Land Securities’ Trinity Leeds scheme - the first significant scheme to commence since the recession began.
Reliable forecasts for 2012 and beyond are difficult as many developers do not comment on the status of their pipeline projects, but no significant shopping centre projects have started construction recently. As a result, completion levels are not likely to pick up before late 2012/early 2013.
As at June 2010, total shopping centre provision in the UK stood at just over 16 million sq.m across 693 schemes (which are over 5,000 sq.m in size). Three new schemes/extensions opened across the UK during the first half of 2010, the largest being the 38,000sq.m Eldon Square South in Newcastle-upon-Tyne.
The most pipeline development activity is taking place in Greater London with three centres currently under construction; Stratford City (175,000sq.m): One New Change in the City (52,000sq.m) and Central Square in Wembley (12,500sq.m). The 230,000sq.m of new shopping centre space equates to a 14% increase in total shopping centre stock. The remaining pipeline schemes are relatively evenly spread across the UK, with eight regions due to see either a new scheme or an extension open by the end of 2011.
Toby Sykes, Partner – Retail Services, Cushman & Wakefield said: “The pre-letting threshold we have achieved on the Trinity Leeds scheme for Land Securities shows that there is still strong retailer demand for prime new retail and leisure developments in UK towns and cities which are carefully designed with specific retailer requirements in mind.”
Darren Yates, Associate in Cushman & Wakefield’s European Research Group, said: “Development activity is expected to remain subdued in the short term. However, some of the large developers are considering restarting projects which were put on hold. Much will depend on the economic outlook which remains uncertain. There is, however, cautious optimism surrounding the prime retail property market. A gradual reduction in availability over the next 12 months should support rental levels and modest rental growth as retailers compete for an ever-diminishing pipeline, but secondary/weaker schemes may see further rental falls.”