The new shape of retail and leisure development

Online retail, rising costs, viability issues and a discerning consumer that increasingly wants more from their shopping trip. It’s a heady mix that is piling pressure onto shopping centre developers. Against this backdrop, what are the prospects for the sector and its ability to deliver new space? In the short term, things are not looking too bad. Cushman & Wakefield says the market this year is at its healthiest since 2013. Colliers International calculates around 2.5m sq ft of shopping centre space is under construction this year, with a similar figure coming along for 2018 – and that, says Dan Simms, head of retail agency, looks quite healthy. Beyond that, however, there is uncertainty over the longer tail of the pipeline. “It’s a case of straightforward viability and demand issues, and there are some fundamental viability questions over a number of planned schemes,” Simms says. Factor in Brexit, Trump and European elections and, says his colleague James Findlater, head of shopping centre investment, “It’s a difficult time to say ‘We’re going to break ground.’ Having said that, there are still opportunities to develop significant schemes.” Openings this year in Oxford and Bracknell are a big talking point. Less in the limelight, but still a sizeable new start, is Unity Walk, a 435,000 sq ft scheme in Stoke-on-Trent. Duncan Mathieson, managing director of developer Realis Estates, believes it will embrace modern needs, including strategic car parking to assist ‘click & collect’ customers and, for retailers, large out-of-town scale units. Elsewhere, the market has seen a number of developments stalling. In Glasgow, delay continues for the Buchanan Galleries extension, where there is a clash with nearby transport improvements. Princesshay’s predominantly leisure extension in Exeter awaits a further planning decision and, near Bristol, the expansion of The Mall at Cribbs Causeway has been delivered a setback with a government call-in. For development that does come forward, some see signs of structural change – such as less potential for mega centres. John Percy, head of shopping centre development consultancy at C&W, cautions “never say never again”, but admits it’s difficult to see where another large regional centre would come out of the ground. [caption id="attachment_877179" align="alignright" width="775"] Croydon, George Street[/caption] Further afield It is a different story out of town, however, where the Derwent Group says its 727,000 sq ft Liverpool Shopping Park is preparing to become one of the UK’s largest shopping parks – demonstrating, it says, a continuing appetite for large-scale shopping. Meanwhile, there is also a growing consensus that new build is giving way to extensions and refurbishments. “When you look at the pipeline, you see how little is new-build space,” says Colliers’ Simms. “Less than half is new build this year, while in 2018 only 25% is genuine new build. Extensions have become a very important part of the market and will continue to be so.” C&W’s most recent UK shopping centre development report identifies the root causes as the feasibility of new build, planning constraints and the time taken in the development process. There is no shortage of examples. Westfield London will open its 740,000 sq ft extension next year; while in Croydon, Westfield and Hammerson await planning permission for their 1.5m sq ft redevelopment of the Whitgift Centre. In north London, Brent Cross is planning a refurbishment and 1m sq ft expansion programme that will double the scheme, linking new and old by a “living bridge”. “On all fronts there will be a paradigm shift,” declares Mike McGuinness, development director for owner Hammerson. Around the country, shaping up are a 90,000 sq ft extension of Aberdeen’s Bon Accord, a modernisation of Basingstoke’s Festival Place and a £60m internal refurbishment of Sheffield’s Meadowhall. Sovereign Centros chief executive Chris Geaves believes: “Now, it’s much more about resurrecting older centres.” The company is investing heavily in Telford, Glasgow, Corby and Wakefield. So if the future may bring less big build and less new build, what about the continuing role of leisure, where there are signs of stress in certain sectors of the occupier market? “It has been a very robust market in recent years but the average diner is facing cost pressures,” explains Colliers’ Simms. “What would have been costs of £25 per sq ft five years ago are now £45.” Kitchen Le Frenais Morgan’s Ian Kitchen says restaurants are, nevertheless, still pushing out of London into regional cities. And other key indicators suggest the leisure market is not at saturation point yet, including strong demand from cinemas, bowling operators, gyms and trampolining concepts. [caption id="attachment_877180" align="alignright" width="775"] Edinburgh St James’[/caption] The new leisure Other new forms of leisure are also emerging. Westgate Oxford is introducing Westgate Social – described by Naomi Howard, leasing director with Land Securities, as a “new iteration” of leisure, which sees food anchored by competitive leisure activities such as bat and ball, darts, golf, ping-pong and pool. “The combination of retail and leisure will continue and I would go further than that to say we will also see more residential elements,” says KLM’s Kitchen. “I think in future we will see a much broader mix of uses in shopping centres.” [caption id="attachment_877181" align="alignright" width="775"] Meadowhall, Sheffield[/caption] Oxford and Bracknell Oxford and Bracknell will deliver schemes this year that will transform their retail centres. Westgate Oxford Alliance, comprising Land Securities and the Crown Estate, is undertaking a £440m redevelopment that will create an 800,000 sq ft retail and leisure mix and is expected to help an underperforming Oxford pull in more than £1bn of retail spend a year. Bracknell town centre is being transformed by a £240m investment in The Lexicon. Simon Russian, head of development for Bracknell with Legal & General, which is partnering Schroders in the project, says it is delivering just under 600,000 sq ft of new-build space, including an £8.5m upgrade of public realm and existing buildings to give the project a holistic feeling. Timeline: UK shopping centre development Sheffield Retail Quarter First phase of Sheffield City Council and Queensberry’s scheme, including 57,500 sq ft of retail Due on site: Spring 2017 Croydon town centre Westfield and Hammerson’s £1.4bn redevelopment Planning decision due: First half 2017 Bon Accord, Aberdeen BMO Real Estate Partners’ 90,000 sq ft retail, F&B, hotel and residential extension Planning decision due: July 2017 Rushden Lakes, Northamptonshire A 230,000 sq ft first phase of the Crown Estate’s £147m out-of-town shopping park Opening: July 2017 The Corn Exchange, Lincoln Lincolnshire Co-op’s first phase of the £70m Cornhill Quarter Opening: Summer 2017 The Brewery Quarter, Cheltenham NFU Mutual’s £30m retail-led expansion of the existing Brewery leisure scheme Completing: Summer 2017 The Lexicon, Bracknell Bracknell Regeneration Partnership and Bracknell Forest Council’s 580,000 sq ft town centre redevelopment Opening: 7 September 2017 Rochdale Riverside A 200,000 sq ft retail and leisure development by Genr8 and Kajima with the local authority Starting on site: September 2017 Westgate, Oxford Land Securities and the Crown Estate’s 800,000 sq ft shopping and leisure destination Opening: 24 October 2017 Festival Place, Basingstoke AEW’s three-phase regeneration programme Completing: October 2017 Tunsgate Quarter, Guildford Merseyside Pension Fund and Queensberry’s 80,000 sq ft redevelopment of Tunsgate Square Opening: October 2017 Liverpool Shopping Park First phase of the Derwent Group’s £100m out-of-town shopping park Completing: Autumn 2017 Unity Walk, Stoke-on-Trent Realis Estate’s 435,000 sq ft new-build scheme Starting on site: Autumn 2017 Bargate Quarter, Southampton A £100m redevelopment of the Bargate Centre by Tellon Capital Due on site: Autumn 2017 Bluewater, Kent Land Securities’ redevelopment of the Plaza, creating new cinema, restaurant and leisure space Completing: Christmas 2017 Queensgate, Peterborough Invesco’s £30m leisure development, including cinema and restaurants (following £8m mall refurbishment) Starting on site: Early 2018 Islington Square, London A £400m new-build, mixed-use development by Cain Hoy and Sager Group, including 170,000 sq ft retail and leisure Completing: Early 2018 Brent Cross, north London Hammerson and Standard Life’s 1m sq ft retail and leisure extension Due on site: Summer 2018 Telford Shopping Centre Sovereign Centros’s redevelopment and extension to create new fashion mall (one of three ongoing projects) Opening: Autumn 2018 The Glass Works, Barnsley Barnsley Metropolitan Borough Council and Queensberry’s £120m retail, leisure and community facilities scheme Completing: Spring 2020 Edinburgh St James APG and TH Real Estate’s £1bn, 1.7m sq ft mixed use scheme Completion (retail element): Late 2020 Meadowhall, Sheffield British Land’s £300m investment in a 330,000 sq ft Leisure Hall (following a £60m mall refurbishment) Opening: Late 2020/early 2021 RETAIL & LEISURE SPECIAL ■ Brexit better than the 2008 recession… and the rise of the robots Even in times of economic downturn, consumers still need to feed, wash and clothe themselves and so will continue to purchase items they require, less what they simply desire, meaning the convenience market, that in which NewRiver focuses on, will remain robust. 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