Developers bank on extensions
Published: 23 August, 2012
2012 has seen a spate of proposals to extend some of the UK’s top shopping centres. What lies behind this trend and why, when development activity is at an all-time low, are developers preferring to extend existing stock rather than work up new schemes?
This month alone has seen plans unveiled for substantial additions to Bluewater and Braehead, and these come hot on the heels of announcements by the Mall at Cribbs Causeway, Westfield London and Lakeside.
Lunson Mitchenall monitors the UK shopping centre development pipeline on behalf of the BCSC, and earlier this year it calculated that 18.3m sq ft of shopping centre space was due to be delivered between 2012 and 2019. Even ahead of the latest announcements, 40 per cent of this space was due to come from refurbishments and extensions.
The growing trend reflects a number of factors including the funding climate, the planning system and the changing face of retailers’ requirements.
According to Lunson Mitchenall’s analysis: “What retailers are saying is they want bigger and better shops in the larger towns and cities, but will have fewer shops in total.”
This explains the apparent dichotomy between Westfield announcing that its UK properties are 99 per cent leased and the Local Data Company saying that nearly 15 per cent of all UK shops are vacant, both in the same month.
Lunson Mitchenall points out: “Despite the internet, additional floorspace is still the primary mechanism that retailers use to grow profit, but retailers are finding it difficult to secure the larger sized units that they need.”
So owners are reacting by trying to extend their biggest and best properties, which are the ones that are in most demand.
Time is another factor. The gestation period of a new centre can be measured in decades, but an extension can be delivered in half the time or less. The necessary infrastructure is already in place and because the precedent for development has already been established, a protracted planning battle is less likely to delay proceedings.
Capital Shopping Centres has long been a fan of what it calls “organic growth” and unveiling the company’s interim results chief executive David Fischel said: “Our prime UK regional shopping centres have continued to show considerable resilience. We have made good progress on our two strategic priorities for 2012, ensuring that our centres produce a strong performance relative to current economic conditions while positioning each asset for longer term organic growth from an increasing pipeline of active management projects and extensions.”
Eldon Square was the first to undergo the full extension and refurbishment treatment, followed by the Metrocentre. Victoria Square, Lakeside and Cribbs Causeway will be next.