New openings and redevelopment of existing UK shopping centres will reach a four-year high in 2017 – a stark contrast to the first half of 2016 which saw no new floor space added, according to Cushman & Wakefield.
Cushman & Wakefield’s UK Shopping Centre Development Report shows that while total UK shopping centre floorspace remained static at 17.25m sqm in H1, a total of 132,911 sqm across 10 schemes are either due to complete (open, be extended or redeveloped) by the end of 2016. Four of these schemes are new development totalling 80,272 sq. m and include Victoria Gate in Leeds and Bond Street in Chelmsford in both instances anchored by John Lewis. There are a further six schemes, totalling 52,639 sq. m which are extensions or redevelopments, most notably the leisure focussed Watermark Westquay in Southampton and the next phase of Moor Sheffield.
A further 252,936 sqm of additional floor space is under construction and due to open in 2017. This will be the most new floor space added since 2013 when Trinity Leeds opened. This is made of six new developments, the largest of which is Lexicon, Bracknell (53,883 sq. m). The remainder of the new space is made up of eight extensions and redevelopments totalling 158,577 sqm; dominated by two projects; the Westfield London (68,748 sqm) extension and fully redeveloped Westgate Shopping Centre in Oxford (45,394 sqm).
John Percy, Cushman & Wakefield’s Head of Shopping Centre Development Consultancy, said: “In football parlance, this has been a year of two halves. After a quiet first six months, we will see schemes completing up and down the country and 2017 will be busier still.
“More than half of this new space consists of extensions to, or refurbishments of, existing centres, reflecting the additional risks and costs of establishing a new build project and taking it through the development process.”
Shopping centre investment volumes in H1 amounted to £1.46bn, down 27% year-on-year. Some 27 shopping centres either transacted or exchanged in H1 2016, with the sale of Grand Central, Birmingham and intu Merry Hill accounting for 51% of the total volumes. While some investors have proved cautious before and after the EU referendum result, councils have played an increasing role in transaction activity. Four shopping centres - Swan Shopping Centre in Leatherhead, The Square at Beeston, Nottingham 50% share in Whitefriars Canterbury and Merseyway Shopping Centre in Stockport - were purchased by councils in the second quarter to go with Market Walk, Newton Abbot, in the first.
John Percy, said: “Councils have the advantage of a low cost of capital but purchasing assets also gives them the opportunity to ensure coordinated control of town centre redevelopment.
“Other development trends include the inexorable rise of leisure within shopping centres. The LDC/BCSC’s latest reports showing that leisure now accounts for 17.7% of the total number of units in the top 30 shopping centres. The leisure mix decreases in smaller centres but there is still growth in the number of units. Developers are devoting more space to leisure in new build schemes following the lead of successful schemes such as Grand Central Birmingham. This is an international as well as national trend, and we await some of the new leisure trends that are starting to emerge that will help drive the next generation of customer engagement.”
Justin Taylor, Cushman & Wakefield’s Head of Retail, said: “Despite the uncertainty that following the EU referendum, prime retail vacancy rates are low and should help to maintain a healthy balance between supply and demand. Occupiers have been creating more efficient property portfolios by acquiring new space, increasing internet sales and click & collect and utilising new technologies and rightsizing to drive efficiencies and overall sales throughout their businesses. Landlords meanwhile have spent the last three years in particular creating greater quality retail assets focusing on their tenants’ needs, so the retail market is currently looking in a healthier condition than it has for a long time to deal with the uncertainty of the Referendum result.”