The year 2012 will be the first in almost 30 years to see no major shopping centres open in the UK.
According to new research commissioned by the British Council of Shopping Centres and property consultant Lunson Mitchenall, developers and investors are still extremely cautious. The lack of development funding is blocking construction and there is an all-time low in consumer confidence.
The total current estimated shopping centre development pipeline is 29.4m sq ft, which has dropped from a peak of 75m sq ft at the height of the development cycle in 2007. This year, owners are mostly providing new retail space with extensions and refurbishments, says the BCSC.
The research goes on to report that developers are requiring anything between 50 and 75% of pre-let retail space before it is even possible to start on site. This is a clear indication of a continued lack of finance, the BCSC points out: speculative development is increasingly rare nowadays.
Retailer requirements have also evolved. The research reaffirms retailers’ demands for bigger, better but fewer units in larger towns and cities. However, the severe lack of new space is resulting in a significantly limited choice for retailers, forcing them to choose units in out-of-town retail parks or expand internationally in order to grow. This adds further pressure to the UK’s struggling high streets and smaller towns.
Commenting on the research, Lunson Mitchenall managing director Marcus Kilby said: “Although the pipeline for new shopping centres will pick up, the fact that 2012 will see no new openings is a stark indicator of how the retail market is evolving and responding to the economic crisis.
“Consumers still want to spend. This is indicated by strong internet sales, and growing retailers are the ones embracing this evolution. However, there is still widespread recognition that shops must remain at the heart of the supply chain. The missing part of the jigsaw is that retailer requirements for these shops aren’t being met by the current stock and this is disappointing and troubling for UK retail.”