The UK shopping center development pipeline has ground to a halt this year but there is light ahead in 2013 according to Cushman & Wakefield, the world's largest privately-held commercial real estate services firm.
The projected 2012 total of new UK shopping center space brought to the market (33,000 m²) m² represents a decline of nearly 90% relative to 2011 (275,495 m²) and will be the lowest annual figure on record since the early 1960s. However, an upturn in development is forecast for 2013 with nearly 175,000 m² of new UK shopping center space in the pipeline for next year.
Less than 20,000 m² of new shopping center space was added to the market in the first half of 2012. This compares to 46,500 m² in the same period last year. Only one new shopping center has been delivered this year: the 15,600 m² Swan Centre in Yardley which opened in February. Extensions account for the remainder of the new shopping center space.
The pipeline for the second half of 2012 comprises six extensions to existing shopping centers, ranging in size from 500 to 5,600 m². This includes the MetrOasis catering development at the MetroCentre, which will increase floor space by around 1,400 m² and provide a link between the MetroCentre and adjacent Metro Retail Park.
Schemes which are expected to open in 2013 include: Trinity Leeds (75,900 m²); New Square in West Bromwich (43,900 m²); the Whiteley Shopping Centre in Fareham (28,000 m²), on the site of the former Whiteley Village factory outlet center; and the refurbished Lewis's Building in Liverpool (15,900 m²), which forms part of the Central Village development.
Toby Sykes, Partner - Retail Services, Cushman & Wakefield, said, "There is substantial potential in the current retail development market for savvy investors to focus on improving schemes through proactive asset management. The lack of supply of new shopping center space, together with strong demand from leading retailers, is a genuine opportunity for landlords. From our experience leasing Trinity Leeds and Whiteley, it is apparent that there is currently robust demand for the right development product."
Kristina Gorkovskaya, Research Analyst in Cushman & Wakefield's European Research Group, said, "The limited amount of new shopping center space coming onto the market should support prime rental levels going forwards. The uncertain economic climate means that many projects are currently on hold."
Investment activity slowed in the first half of 2012, with only £0.8 bln (approx. 1 bln) of shopping center assets transacted, compared with £1.2bn in the previous six months. Deals included Westfield's sale of its interest in three non-core UK shopping centers to its long-term partner Hermes for an estimated £190 mln (approx. 239 mln). Prime regional and sub-regional shopping center yields held firm, while smaller, secondary schemes remain under pressure, with yields moving out by 50 bps.
Source: Cushman & Wakefield