Shopping centre vacancy rates forecast to fall in 2010
Published: 05 January, 2010
Retail vacancies are set to fall during 2010, according to King Sturge. But an anticipated surge in development activity from 2012 could lead to a new oversupply of retail space.
In King Sturge's annual Property Predictions, the consultancy's head of retail, Charles Miller, forecast that vacancy rates would recover from their nadir of around 20 per cent to around 10 – 12 per cent by the end of 2010. But he warned that the picture would continue to be patchy. “The rates will be higher in some centres as the recession continues to cruelly expose towns that are failing, highlighting the ongoing need for regeneration,” he said.
Miller said that occupier demand is not dead, but retailers were being very selective and opportunistic. As a result, he forecast a continuing tenants' market with average retail rents set to fall by 3.1 per cent in 2010 and by a further 1.3 per cent in 2011.
This will prove a brake on the investment performance of shopping centres, and as a result malls are likely to be the worst-performing sub-sector of the UK commercial property market this year. King Sturge is forecasting a total return of 11 per cent for shopping centres in 2010, against 13 per cent for the commercial market as a whole.
Looking further ahead, Miller warned that the development market was in danger of repeating the boom and bust cycle of the past decade. “In a very difficult market the supply pipeline has been derailed,” he said. “However the next wave of development is already being lined up for 2012/13, when market conditions are forecast to be more conducive to new supply.”
