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5th December 2017
The pressure on consumer spending and the growth of online shopping has inevitably taken its toll on the pace of new retail development. After a 25% rise in the value of new project starts last year, the latest Glenigan forecasts suggest that the value of starts in the retail sector will fall by 4% this year although they will pick up by 1% in 2018.
But one area where activity remains buoyant is in revamping and extending the larger premium shopping centres. A series of major new investments are going ahead to extend and transform existing shopping centres around major cities - often involving a significant leisure element - which developers are confident will pay off.
Intu Properties, the UK’s largest owner of shopping centres in the region, recently painted an upbeat picture on current trading and highlighted how the strong catchment, reliable footfall and leisure content of its 20 prime centres was appealing to flagship brands such as Next, Primark, Decathlon, and Nespresso. All of these retailers are seeking to ‘optimise’ their store sizes and intu says it has recently agreed 63 long term leases in the UK. It expects further growth in net rental income in 2018 and 2-3% over the medium term.
Taking advantage of these trends, intu has started work on a £73 million, 175,000 sq ft leisure extension at Lakeside off the M25 which will open late next year and where the overall project is 85 per cent pre-let. Meanwhile, Laing O’Rourke this month topped out a £180 million redevelopment of intu Watford shopping centre - which includes a nine-screen cinema - ahead of its opening in Autumn 2018. In Manchester, construction procurement is underway at intu’s £74 million expansion of Barton Square Trafford Centre where completion is expected by mid-2019.
Hammerson, which owns 20 shopping centres across the UK, recently echoed the positive message on the sector when it reported good levels of leasing activity. It said retailers were prioritising prime retail venues to support their multichannel sales platforms, although some leasing discussions were taking longer to conclude.
Hammerson and Standard Life Investments are finalising the design and procurement on the £700 million regeneration of their landmark Brent Cross London shopping centre in the north west of the capital ahead of a start on site in 2018. Laing O’Rourke is the preferred bidder for the main construction works on the project, which will double its size to 2 million sq ft of retail and leisure space and will include up to 150 new retail stores, 50 new restaurants and a hotel. A new bus station and improved roads and public spaces are also planned.
Meanwhile in Croydon, approval was granted in November for a huge new £1.4 billion shopping centre serving South London in a joint venture between Westfield and Hammerson. The scheme involves the development of the Whitgift Centre and the refurbishment of the Centrale Shopping Centre and will involve over 300 shops, restaurants and cafes, improved leisure facilities and up to 1,000 homes. Glenigan data shows that work on the site, which covers almost seven hectares and involves over 159,000 sq m of floor space, is set to start in November 2018 and will run for 42 months.
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