What will Hammerson’s takeover of rival developer Intu mean for construction?

At the start of December, Hammerson agreed a deal with Intu to create a development group with around £21 billion-worth of assets. The agreement, which will see Hammerson retain a 55% stake in the newly combined business, will also create a business that will be amongst the industry’s 30 biggest spending clients.

Glenigan economics director Allan Wilen said: “The agreement looks likely to lead to some disposals of existing assets as the new group focuses on higher return regions such as Ireland and Spain but both these companies have significant pipelines of work planned.”

Glenigan’s research on the construction industry’s biggest spending clients in terms of main contracts awards shows that in the 12 months to November 2017 Intu had let 7 contracts valued at a total of £161.2 million.

Over the same period, Hammerson had let 10 contracts valued at a total of £70.9 million. This combined spend would have ranked a combined Intu/Hammerson business in 29th place in Glenigan’s ranking of the construction industry’s top 50 biggest spending clients. Only ProLogis and Vastint have bigger pipelines of work and the newly enlarged Hammerson will be the biggest spending retail-specific client.

The biggest scheme in the pipeline is Intu’s £92 million redevelopment of the Broadmarsh Centre in Nottingham. Bowmer & Kirkland have a £1.8 million enabling package and Sir Robert McAlpine was awarded the main £90 million contract in August 2017. Demolition is expected to start in March 2018.

Intu has already started on other schemes including a £50 million redevelopment of Lakeside Shopping Centre in Thurrock with contractor McLaren moving on site this summer.

According to Glenigan’s research, Hammerson’s biggest contract award in the last 12 months was a £23 million deal to Bowmer & Kirkland for a retail scheme in Didcot being developed with South Oxfordshire District Council.

A £10 million revamp of Brent Cross Shopping Centre started in December 2017 and Hammerson also has a swathe of schemes in the pipeline. These include a £90 million redevelopment of the Centrale Shopping Centre in Croydon, which was expected to go out to tender at the end of 2018.

Intu also has big projects in the pipeline including a £74 million plan to provide a new roof over part of the Trafford Centre in Manchester to create 112,000 sq ft of new retail space.

The impact of the Hammerson takeover remains unclear but David Atkins, who will be chief executive of the new company said: “I look forward to working with a strengthened team to enhance the performance of our entire portfolio.”

Overall starts in the retail sector are in a delicate state with Glenigan forecasting a 2% rise in underlying starts in 2017 but next year is expected to produce a fall. Mr Wilen adds: “The retail development pipeline is subdued. Falling in-store sales have prompted retailers to review their retail estates as a growing proportion of their sales are generated online. Rising online retail sales are also a spur to investment at established shopping centres with landlords seeking to enhance their attraction to consumers by investing in more leisure and dining facilities.”

For the construction industry, the hope will remain that the Intu-Hammerson deal will see the retail sector’s biggest landlord continue to invest.