Analysis: The out-of-town pipeline

Retailers are used to hearing about the development – or rather lack – of new shopping centres coming onstream over the next few years, but there’s been little emphasis on the development pipeline for out-of-town retail parks, where demand can often be stronger.

That’s not to say development hasn’t been affected by the recession. Figures from consultancy Trevor Wood Associates identify 82 schemes thought likely to go ahead before 2018, up on the 72 schemes listed last year, but down on the 178 schemes planned in 2006 before the onset of the financial crisis. Commercial property and real estate services adviser CBRE’s report on retail warehouse parks shows that overall the pipeline has contracted by 12.5% since 2007, while the amount currently under construction is just 34% of what it then was.

In addition, the strengthening of town centre first policies has made obtaining planning permission for out-of-town developments difficult and landlords are often resorting to sprucing up existing developments instead. “The planning for these schemes isn’t being granted these days. They’re trying to resolve the regeneration of town centres, so it’s hard for us to get new stock in the pipeline. [Instead] we’re looking at recycling old stock,” says John Maddison, head of retail warehouse asset management at British Land.

Mike Taylor, director of out-of-town retail and leisure at property firm Jones Lang LaSalle, agrees that asset management is high on the agenda, as landlords try to “squeeze out more floor space, or to try and reconfigure floor space so that it meets the modern requirements of retailers”, generally by expansion.

Some local authorities are adopting a more pragmatic attitude towards granting planning permission for out-of-town retail parks. Many local councils are keen to ensure they don’t lose key retailers, and the associated jobs and boost to the local economy, to a neighbouring area. “The planning environment is not easy, but has got easier, following the recognition that retail jobs are real jobs,” says Dominic O’Rourke, head of retail warehousing at Land Securities.

On the horizon

And there are some developments expected to surface over the next year. Land Securities has secured planning consents for various asset management and development initiatives, including at Taplow –  a 131,500 sq ft redevelopment of the existing Bishop Centre, anchored by a 50,000 sq ft Tesco. These consents represent total floor space of 678,370 sq ft, 301,870 sq ft of which is new net additional floor space. “The development programme has the potential to move the dial for us,” says O’Rourke.

The Crown Estate-owned 117,500 sq ft MK1 Shopping Park in Milton Keynes is anticipated to open in October, and will feature a 10,000 sq ft H&M, a 65,000 sq ft Marks & Spencer, a 15,000 sq ft Outfit, a 7,500 sq ft River Island, and a 30,000 sq ft Primark. In April next year, Stadium Group’s 170,000 sq ft Prestatyn Shopping Park will open, and will feature a 50,000 sq ft M&S, a 75,000 sq ft Tesco Extra, plus River Island, Poundland, New Look, Boots and Carphone Warehouse.

Meanwhile, in 2014 the 179,000 sq ft Vanguard Shopping Park will open adjacent to Monks Cross in York, bringing with it M&S and John Lewis. Walton says this provided a compelling jobs argument, and together with added benefits including a community stadium, helped get the local council on side.

At present, demand is outstripping supply in key areas. Retailers seeking to expand their portfolios such as Next, John Lewis, M&S, Primark and H&M, have all been increasing their presence in retail parks. “They realise there is no space that’s going to come online for years to come, and the only opportunity they’ve got to increase their floor space is acquiring out of town,” says Dominic Walton, head of out of town at CBRE.

Debenhams, for instance, is to take an anchor at Fort Kinnaird in Edinburgh, which is managed by British Land and jointly owned by Hercules and Crown Estate. “It’s quite unique to build a brand new big Debenhams out of town, it’s not something that happened in the past. It’s the first time we’ll do something that bespoke for a department store in our market,” says Maddison. He adds that there is also demand from Next for either additional or larger units to house its Home offer, and there are a “few deals coming up” that take the retailer  from 10,000 sq ft to 25,000 sq ft units.

However, Clem Constantine, property director of M&S, says the lack of new shopping centres in the pipeline doesn’t mean retailers are being driven out of town. “We will open out-of-town stores where it’s right to do so, but M&S is predominantly a high street and shopping centre retailer and there are quite a few smaller, attractive in-town developments coming on stream that are a pull to town centres for retailers like us,” he emphasises.

Despite this, the number of retailers that still aim to expand their store portfolios shows that occupier demand is there, and the retail property industry will need to continue working closely with local authorities to gain consents for out-of-town retail parks.