The UK shopping centre development pipeline has ground to a halt this year but there is light ahead in 2013 according to Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm.
The projected 2012 total of new UK shopping centre space brought to the market (33,000 sq.m) represents a decline of nearly 90% relative to 2011 (275,495 sq.m) and will be the lowest annual figure on record since the early 1960’s. However, an upturn in development is forecast for 2013 with nearly 175,000 sq.m of new UK shopping centre space in the pipeline for next year.
Less than 20,000 sq.m of new shopping centre space was added to the market in the first half of 2012. This compares to 46,500 sq.m in the same period last year. Only one new shopping centre has been delivered this year: the 15,600 sq.m Swan Centre in Yardley which opened in February. Extensions account for the remainder of the new shopping centre space.
The pipeline for the second half of 2012 comprises six extensions to existing shopping centres, ranging in size from 500 to 5,600 sq.m. This includes the MetrOasis catering development at the MetroCentre, which will increase floorspace by around 1,400 sq.m and provide a link between the MetroCentre and adjacent Metro Retail Park.
Schemes which are expected to open in 2013 include: Trinity Leeds (75,900 sq.m); New Square in West Bromwich (43,900 sq.m); the Whiteley Shopping Centre in Fareham (28,000 sq.m), on the site of the former Whiteley Village factory outlet centre; and the refurbished Lewis’s Building in Liverpool (15,900 sq.m), which forms part of the Central Village development.
Toby Sykes, Partner – Retail Services, Cushman & Wakefield, said, “There is substantial potential in the current retail development market for savvy investors to focus on improving schemes through proactive asset management. The lack of supply of new shopping centre space, together with strong demand from leading retailers, is a genuine opportunity for landlords. From our experience leasing Trinity Leeds and Whiteley, it is apparent that there is currently robust demand for the right development product.”
Kristina Gorkovskaya, Research Analyst in Cushman & Wakefield’s European Research Group, said, “The limited amount of new shopping centre space coming onto the market should support prime rental levels going forwards. The uncertain economic climate means that many projects are currently on hold.”
Investment activity slowed in the first half of 2012, with only £0.8bn of shopping centre assets transacted, compared with £1.2bn in the previous six months. Deals included Westfield’s sale of its interest in three non-core UK shopping centres to its long-term partner Hermes for an estimated £190m. Prime regional and sub-regional shopping centre yields held firm, while smaller, secondary schemes remain under pressure, with yields moving out by 50 bps.