For the first time in almost 30 years, 2012 will be the first year to see no major shopping centres open in the UK, according to research commissioned by BCSC and Lunson Mitchenall, the specialist retail and leisure property consultants.
The BCSC/Lunson Mitchenall 2012 Shopping Centre Development Pipeline reports, although the world’s eyes are on the UK as it celebrates the Queen’s Diamond Jubilee and the Olympic Games this summer, no new shopping centres will open their doors to consumers at any stage during 2012.
Although the shopping centre pipeline will pick up in 2013, developers and investors remain extremely cautious, said researchers. The lack of development funding continues to block construction activity alongside an all-time low in consumer confidence. The total current estimated shopping centre development pipeline is 29.4m sq ft, which has dropped from a peak of 75m sq ft at the height of the development cycle in 2007.
In 2012, the reality remains extensions and refurbishments are the most likely mechanism for owners to provide new leisure and retail space, said BCSC/Lunson Mitchenall. Indeed, even the larger, more comprehensive developments are usually a replacement of outdated and tired retail stock. The research goes on to report developers are requiring anything between 50% and 75% of pre-let retail space before it is even possible to start on site. This is a clear indication of a continued lack of finance – speculative development is an increasingly rare species nowadays, said BCSC/Lunson Mitchenall.
Retailer requirements have also evolved. The research re-affirms retailers’ demands for bigger, better but fewer units in larger towns and cities. However, the severe lack of new space is resulting in a significantly limited choice for retailers, forcing them to choose units in out-of-town retail parks or expand internationally in order to grow, said researchers. This adds further pressure to the UK’s struggling high streets and smaller towns.
Marcus Kilby, managing director, Lunson Mitchenall, said: “Although the pipeline for new shopping centres will pick up, the fact that 2012 will see no new openings is a stark indicator of how the retail market is evolving and responding to the economic crisis.
“Consumers still want to spend. This is indicated by strong internet sales and growing retailers are the ones embracing this evolution. However, there is still widespread recognition shops must remain at the heart of the supply chain. The missing part of the jigsaw is retailer requirements for these shops aren’t being met by the current stock and this is disappointing and troubling for UK retail.”
Edward Cooke, director of policy and public affairs, BCSC, said: “Development is expected to continue at much more restrained pace for the foreseeable future, certainly when compared for to the bull market of a few years ago. In order to get new investment into the UK’s towns and cities the government needs to push forward with a genuine commitment to Tax Increment Finance (TIF), which would open up the development pipeline significantly and support the changing UK retail landscape. It is only with the full support of government providing the necessary stimuli and infrastructure – both financial and physical – our town centres will experience much needed regeneration.”