Retail park planning applications jumped by 60% in 2016, heading for a 10-year high. As the retail market faces a barrage of storms from currency fluctuations squeezing margins, the impact of interest rate changes on consumer spending and the move online, EG delves into the data and analyses the 10 things you need to about UK retail parks.
With developer confidence in new retail parks still strong and administrations rising we ask is the town centre first policy working, is there likely to be an oversupply of new space and if the market will collapse.
1
Developer intent is strong…
Since 2013, there has been a steep rise in the number of planning applications submitted for new out-of-town retail schemes in the UK. The number of applications for retail parks jumped from 14 to 24 year on year. If built out that equates to 4.2m sq ft of new A1 space.
2
…that is on top of an already bloated retail footprint
That development pipeline comes off years of exceptional growth, enough to cover a whole country with shops. The overall footprint for new A1 space applied for over the past 10 years is more than 39m sq ft. That equates to 3.66 sq km, which engulfs the world’s smallest country, the Vatican City.
3
There is little sign those applications are being sat on
ALL RETAIL PIPELINE TOTALS (SQ FT) (Retail Summit 2016) |
|||
|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 |
| 4,473,850 | 10,218,213 | 5,735,256 | 2,095,666 |
There is a healthy excess of retail space due to come to market in the coming two to three years. The pipeline for new stock seems in a much more buoyant than one might have forecast.
EG looked into the current development pipeline for new retail stock in both shopping centres and retail parks throughout the UK, in terms of space proposed and what is currently under construction.
SEE ALSO: Retails extended interest
4
That’s more physical space just as consumers head online
Missed this prior to Christmas, but the online share of avg weekly spend (excl. fuel) topped 18% in November. [ONS] https://t.co/46JN4MEBsR pic.twitter.com/JwmUFjUFnf
— Graham Shone (@Graham_Shone) January 3, 2017
Online spend has steadily grown, climbing from 4.4% in 2008 to more than 18 % at Christmas 2016. If we cast our minds back a few years, many in the industry voiced concerns of the encroaching World Wide Web – the internet, thought to pose a real threat the bricks and mortar side of physical retail.
Who is going to go shopping if they can purchase anything they want from the luxury of their own home? That almost became the tag line for a sector weighted with the burden of uncertainty.
5
As administrations rise, is there enough space out there already?
TOWN CENTRE v OUT OF TOWN
Last year EG showed that in H1 2016 7.8 m sq ft of retail space was put at risk of closure by the five brand administrations:
- BHS
- Brantano
- Blue Inc
- Austin Reed
- Store Twenty One
Even in an increasingly digital age, physical stores are clearly still required, but has retail become the ultimate zero-sum game? A total of 6.1m sq ft of new retail space has been completed in town centres over the last four years as part of major developments, while 2016 administrations have seen roughly the same amount of town centre retail space put at risk – 6.5 m sq. ft.
SEE ALSO: Retail space at risk?
6
Town centre first policy isn’t working…
The town centre first policy was implemented in March 2012 with the distinct goal of reducing this effect of sprawling retail destinations, as part of a drive to keep regeneration at the hub of community centres.
With real worries about the death of the high street and the demise of bricks and mortar retail at the turn of the decade, this was introduced to safeguard what could be built and where. However, as we look at the data we find that application and development have done quite the opposite, accelerating instead of decelerating.
7
…or is it?
So in theory the town centre first policy does not seem to be dissuading developer intent or perhaps working as it was designed to. Of course this does not take into account any redevelopments of existing schemes, or the safeguarding of town centre areas.
However, look at the permission rates of those schemes and the lines begin to move inwards. So although applications are increasing – the rates of permission for out-of-town schemes are falling.
8
Total retail space realigning
As we can see from the chart the increase of retail park space does eat away from the rest of the total space of A1 applications.
You can see that from 2013 the amount of space coming through remains stable and that despite the peaks and troughs of town centre vs out of town developments, the overall footprint remains healthy.
Retail development in this respect does seem to be a zero sum game and there is a symbiotic relationship between the town centre and out-of-town as destinations.
9
Out-of-town schemes are changing
TOP 10 TENANTS MOVING TO RETAIL PARKS 2007 ONWARDS (number of shops)
 |
 |
 |
 |
 |
|---|---|---|---|---|
65 |
60 |
56 |
46 |
44 |
 |
 |
 |
 |
 |
40 |
39 |
38 |
34 |
32 |
Budget supermarkets are the new M&S.
The retail park concept has changed dramatically over the past decade. The traditional warehouse-led white goods template for hardware and electronics is being eroded and in its place is emerging from this a more fashion and entertainment-led environment. Food stores compliment them as well as a healthy A3 provision, moving away from the fast-food drive-thru culture from the past.
Interestingly, many new schemes coming off the ground are anchored by budget supermarkets such as Aldi or Lidl, which have flourished in the post 2008 economic climate. They are more likely to include budget stores such as Poundland or Home Bargains – other retailers who have fared well in the post-recession Britain.
10
The South East takes the lion’s share
Break those stats down by region and the majority are in Scotland and the South East, both traditional hubs for out-of-town activity over the past decade.
There is no real surprise to see the South East at the top – if you add in the London factor of high population, high land costs and low land availability – it is easy to see how those out-of-town schemes would be presented as an alternative to town-centric-led development.
Conclusions
Developer intent remains strong – despite higher levels of internet spend and retailers still consolidating their physical space. It is very possible we may see more administrations this year, especially in the light of Brexit and the economic uncertainty that follows – and it is entirely probable we will see certain retailers that could open up even more space and take advantage of others’ misfortunes.
There is already a very healthy pipeline of stock and continued additional permissions may push the market into that area of oversupply. As we have seen, out-of-town schemes are continuing to evolve and we will see an increasingly diverse tenant mix in the future. Thus safeguarding against a glut of brand new out-of-town space when town centre retail continues to be repurposed and refurbished will be important.
Getting the right scheme in the right place at the right time will remain paramount to developers.
PROPERTY’S POINT OF VIEW
James Child, EG‘s retail research manager, and retail and leisure reporter Amber Rolt discuss the recent trends in the out-of-town development sector
• To send feedback e-mail james.child@estatesgazette.com or tweet @jamesChildEGi or @estatesgazette
