The UK shopping centre development market remains subdued in the short-term but a surge of activity is expected in 2017, according to new research released today by global real estate adviser Cushman & Wakefield at the annual British Council of Shopping Centres (BCSC) Exhibition in London.
Cushman & Wakefield’s UK Shopping Centre Development report reveals development activity has been restrained so far in 2014 and the trend is continuing into the second half of the year – an estimated 1.34 million sq ft (124,300 sq m) of shopping centre space is due to be added over the course of 2014, less than half the total added in 2013.
However, 2017 should see development pick up significantly, with an estimated 1.93 million sq ft (179,000 sq m) of space to be delivered primarily across two new shopping centre schemes: the 1.26 million sq ft (117,000 sq m) Victoria Gate in Leeds and a 580,180 sq ft (53,900 sq m) regeneration of Bracknell town centre.
The 585,562 sq ft (54,400 sq m) of new space delivered to the market in H1 2014 was in the form of three shopping centre developments all of which were in the West Midlands, with the largest being the 307,850 sq ft (28,600 sq m) Old Market in Hereford. Three smaller shopping centres are expected to open by the end of 2014, totalling 224,968 sq ft (20,900 sq m), alongside a further gain of 522,054 sq ft (48,500 sq m) resulting from seven extensions and one development.
In 2015, the development pipeline is anticipated to total 1.66 million sq ft (154,618 sq m) and includes the 550,000 sq ft (51,100 sq m) Westfield Bradford and the 300,000 sq ft (27,870 sq m) Friars Walk in Newport; both are due to open next autumn. Next year should also see the delivery of several shopping centre extensions, most notably Birmingham’s Grand Central centre which will nearly double in size to 570,492 sq ft (53,000 sq m). Lagging even further behind, 2016 will see 300,316 sq ft (27,900 sq m) added to the market when Bond Street shopping centre in Chelmsford completes.
UK shopping centre investment volumes continued to soar in 2014, reaching more than £3.2 billion in the first six months of this year and approaching double that of H1 2013 (£1.8 billion). The standout deal of H1 was Land Securities’ acquisition, advised by Cushman & Wakefield, of the highly coveted 30% stake in Bluewater from Lend Lease for £656 million, followed by two transactions by intu for Westfield Merry Hill and Westfield Derby, amounting to £759 million.
Demand from foreign investors continues to intensify, with the KWAP Pension Fund from Malaysia acquiring 80% of intu Uxbridge for £218.5 million. Domestic property companies also had a marked impact on investment activity and portfolio deals such as M&M/Apollo’s ‘Project Moon’ for a variety of shopping centre stock indicate that confidence is booming, even at the secondary end of the market. Prime yields have hardened and will continue to come under downward pressure throughout the year.
Cushman & Wakefield’s head of EMEA retail, Justin Taylor, said: “While the current development pipeline is still below pre-recession levels, the shopping centre investment market is one of the most active sectors in the UK property market. The scarcity of prime assets alongside improved financing conditions should encourage developers to revive new and existing projects, resulting in an improved development forecast for 2017.”