The UK shopping centre development boom shows distinct signs of cooling off, according to research released by Colliers CRE at the BCSC conference. The agent calculates that shopping centre floorspace in the development pipeline for the next five years has fallen by 15 per cent, or 8.4 million sq ft, as slackening retailer demand and a tougher funding climate force developers to reconsider their plans.
The total amount of shopping centre floorspace scheduled for completion between 2007 and 2012 currently stands at just 44.5 million sq ft, compared to 52.9 million sq ft at this time last year. A number of schemes have been completed since the 2006 survey. Combined with the refusal of some planning applications, a more difficult funding market and caution from developers, who deem some proposals to be no longer viable, this means that, within the current development pipeline, more schemes are completing than are being added, so the overall volume is falling.
Greg Styles, head of retail at CCRE, said: "Tough trading conditions for retailers have begun to restrict the number of requirements for new space and this means there is now an imbalance between supply and demand for retail floorspace in some locations.
"This is causing developers to exercise caution and some are choosing to delay scheme openings until more positive market indicators are evident."
Reflecting this new air of caution, Grosvenor has declared that the age of the blockbuster scheme is over. Although it is committed to seeing through its projects in Preston and Crawley, it is focusing its attentions on smaller, less risky schemes. The company's retail strategist Jenefer Greenwood said that once Liverpool One and Grand Arcade in Cambridge open next year Grosvenor would not be looking to replace them in the pipeline. Instead, a team is being put together to focus on smaller infill development.
And according to Adrian Powell, head of retail development at DTZ, other developers are likely to adopt a similar approach. "Economic and political stability has led to a surge in the number of big schemes, but do those factors still apply?" he asked.
And he said the massive demands for capital contributions from department store operators is leading developers to look for smaller projects, often located in town centres close to existing department stores. "Building without a department store cuts out a lot of the risks," he warned.
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