Shopping centre development remains stalled – Knight Frank
Concerns about the UK economy and the eurozone crisis have continued to affect UK shopping centre development activity, and the availability of debt funding for such schemes. Knight Frank, in its latest research into the sector, says development activity for shopping centres is unlikely to rise significantly before 2015 at the earliest. Instead, the focus will be on extensions and redevelopment.
Knight Frank does not expect any significant schemes to deliver new space in the second half of this year. The pipeline for 2013 appears to be better, but new shopping-centre space will remain limited next year, with only two new centres of more than 40,000 sq m due to open in 2013. These are Trinity Leeds at 93,000 sq m and New Square in West Bromwich at 43,900 sq m.
However, the firm says it has begun to see a number of in-town development schemes coming back to life, such as Westfield Bradford, and Hammerson’s Eastgate Quarters in Leeds. “Arguably, those brave enough to venture into the development arena now could benefit from the need for retailers to expand in the “right” locations,” Knight Frank says. “Food store and leisure development has also been continuing.”
The firm notes the continued highly polarised nature of the UK shopping centre market, with Central London seeing upward pressure on rents but a less optimistic story elsewhere. Demand for the best shopping centres continues to outstrip available retail space, as demand for larger units continues and the lack of new space also persists. As a result rents in prime shopping centres have remained flat while rents in secondary centres remain under downward pressure.
The out-of-town retail market is in better health than it was two to three years ago, Knight Frank says, thanks to steady demand and limited new development. This has helped to erode the vacant space left by corporate failures during the downturn. “Demand for prime open A1 schemes has remained firm,” it notes, “although bulky goods schemes have seen vacancy rates edge up – driven by the closure of some DIY furniture and consumer electronics retailers.”
