Millions of square feet of UK shopping centre space will never be built despite having planning permission, as a challenging retail environment makes developments unviable, according to a new report.
The rise of online retail and a drop in high street footfall mean the cost of building or redeveloping many centres would exceed their value, property consultancy Colliers International found.
It said more than 10m sq ft of new-build centres and expansions to existing shopping malls scheduled to be built in the next three years would not be completed.
“Shopping centres typically take 10-20 years to put together, and many of them hit the building stage during the depths of the recession,” said Mark Phillipson, head of retail at Colliers. “Although we’re in a much more stable economic environment now than in 2008, the market is still not buoyant enough to start building brand new shopping centres. They’d need a prolonged economic boom for that to happen.”
The report follows some of the most high-profile failures on the UK high street in nearly a decade. This month BHS said it would close after 88 years, with the loss of 11,000 jobs and 164 stores. Formal menswear retailer Austin Reed, whose suits had been worn by celebrities and dignitaries, also closed, with analysts pointing to the rise of strong online competitors as a factor in their demise.
Richard Hyman, an independent retail analyst, said: “In the last 10 years, online alone has added the equivalent of 110m sq ft of trading space — that’s roughly equal to 65 additional Westfield London shopping malls. An increase in supply of retailers, with no increase in demand, has left the industry massively oversupplied.”
Nevertheless, the Colliers report found that for prime retail locations across the UK, commercial rent prices were almost unanimously rising for the first time since the recession. “It’s the rosiest picture for prime locations since 2008 — only 5 per cent of prime locations have reported a slide in rents in the last year,” Mr Phillipson said.
Developments that are going ahead are primarily in affluent areas, and are extensions to existing sites rather than new builds. Westfield shopping centre is expanding by 800,000 sq ft in a £1bn project that will make it the largest shopping centre in Europe.
“It used to be a case of ‘build it and they will come’, and retailers were working on that principle when they planned new stores 20 years ago,” Mr Hyman said. “But the market has changed so much since then, and with a few notable exceptions such as Westfield, there’s not enough demand to justify those new builds today.”
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