Shopping centre development projects rose sharply in the direct aftermath of the recession, although this has dropped somewhat in 2014 due to the continuing economic restraints experienced by commercial property owners. However, according to new information released by Cushman & Wakefield’s UK Shopping Centre Development Report, this lull is due to vanish in the next few years, with a development boom predicted for 2017.
The report states that only 1.34 million square feet of shopping centre space is due to be added to the UK footprint in 2014, meaning that this year will see less than half of the total added in 2013. Yet Cushman & Wakefield point out that 2017 will see two new shopping centre destinations alone deliver a combined total of 1.93 million square feet, with the upcoming Victoria Gate in Leeds and Bracknell town centre regenerations both due for completion that year.
During the first half of 2014, the West Midlands proved highly important in the creation of shopping centre space, with three shopping centres opening in the region – the largest was the Old Market in Hereford at 307,850 square feet. For the remainder of the year, only three smaller developments are expected to open, with the total of 244,968 square feet only marginally boosting the subdued sector.
2015, however, will see around 1.66 million square feet of shopping centre space added to the market, as forecast by Cushman & Wakefield. This includes two new developments; Westfield Bradford and Friars Walk in Newport, at 550,000 square feet and 300,000 square feet respectively, along with the highly anticipated opening of Birmingham’s Grand Central centre which will almost double in size to 570,492 square feet.
Head of EMEA retail at Cushman & Wakefield, Justin Taylor, believes that the growing interest from overseas investor in the UK’s shopping centre sector will kick start development in 2017.
He says; “While the current development pipeline is still below pre-recession levels, the shopping centre investment market is one of the most active sectors in the UK property market.
“The scarcity of prime assets alongside improved financing conditions should encourage developers to revive new and existing projects, resulting in an improved development forecast for 2017.”
While it is true that the recession is over, developers remain wary of gambling their finances in speculative development projects – although this has primarily affected the office market, shopping centres are also struggling to find the space to accommodate new tenants. This has seen occupancy levels at shopping centres around the country rise sharply in recent months, with the vacancy rate in these retail destinations dropping at a much swifter level than has been seen on the High Street.
As investment volumes for UK shopping centres continue to climb, with £3.2 billion raised in the first half of 2014 alone, it seems that developers need to play catch-up in order to truly benefit from the returns the lucrative sector can offer. However, with many wary of further economic downturn, it may indeed be 2017 before any real progress is made.
Do you think developers are being held back by the caution instilled in them by the many failed development projects nationwide during the economic crisis?
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