UK showing a sharp drop in shopping centre development, says Cushman & Wakefield

LONDON: Only two new shopping centres of more than 40,000 sq m are due to open in 2010, making it likely the lowest amount of new shopping centre space opening in the UK in almost 15 years, according to Cushman & Wakefield’s new Shopping Centre Development Report.

The two shopping centres are The Rock in Bury, measuring 49,806 sq m and Eldon Square in Newcastle-upon-Tyne at 40,000 sq m. In 2009, the two largest shopping centres to open in the UK was St David’s 2, Cardiff at 89,880 sq m, followed by Union Square, Aberdeen at 50,166 sq m.

In comparison, 2008 was a record year with new shopping centres, with a total of 945,000 sq m opening in the UK. This was the largest new supply of centres since Cushman & Wakefield began monitoring the market in 1965 when the UK’s first covered shopping centre in Elephant & Castle, London opened its doors for business.

The schemes that opened in 2008 and 2009 were all conceived during periods of economic confidence. Following the onset of the credit crunch in Autumn 2007 and falling confidence in the economy, many schemes were either out on hold or delayed until the market shows stronger signs of improvement. However, Cushman & Wakefield noted that the highest profile of the schemes opened in 2008, Liverpool One, Leicester Highcross and Bristol’s Cabot Circus were all almost fully let upon opening, proving a demand for space from retailers.

“We are definitely experiencing more demand and on improving terms than earlier in the year, however, parts of the market remain more difficult. London remains strong, as do the major metropolitan cities and prime dominant shopping centres. This is evidenced by schemes such as Liverpool One, which is now virtually fully let, and reports from landlords such as Liberty, which have reported improved occupancy rates to 98.9%. We anticipate this demand will continue, particularly given so many shopping centre developments have been put on hold, leading to less supply,” said Justin Taylor, head of shopping centres, Cushman & Wakefield.

According to Alexander Colpaert, retail analyst, Cushman & Wakefield, the shopping centre pipeline for 2010 is more than 50% down on the 10-year average annual completion level. "It is clear that the pace of shopping centre development in the UK is set to fall sharply in the next two years. While retailer demand for the very best centres has been relatively good, for some schemes landlords have had to provide significant incentives to attract tenants. The fall-off in shopping centre development in the UK is broadly in line with the trends seen in continental Europe.  However, Eastern Europe has been more adversely affected by the economic recession, with some shopping centres closing soon after completion, while other schemes have been mothballed mid-construction,” he said.

Cushman & Wakefield expects completion levels to pick up in 2012, with most focusing on extension and redevelopment. A major exception will be Westfield’s Stratford City, which is set to become the largest urban shopping centre in Europe with 175,000 sq m when it opens in 2011.