Planning: Appetite for development

Retail parks are having to grow up, according to Savills associate director of out-of-town Dominic Rodbourne. This is a fact that most are now agreed
on and the stimulus is coming from the dynamism of the retail market. The uncertainty that has dogged the out-of-town market in the past year has dented confidence and changed priorities, but there are still plenty of retailers looking to the future with positive plans.

But not all factors are within the market’s control. In July, the Government surprised many by bringing out a revised report on its policy affecting the future of out-of-town developments, PPS6. Even more surprising than the decision to publish it when it did was the lack of clarity it contained.

Rife with ambiguities, the report on the one hand appeared to support previous pledges by the Government to favour town centres, while on the other left the door open for a relaxation on the restrictions surrounding out-of-town development.

The report has left many with more questions than answers. From a planning point of view it has now become difficult to forecast how things will pan out until the final draft of the policy is released.

Strutt & Parker partner of strategic development and planning Brian Raggett says: “Until PPS6 has been finalised it is probably not quite certain whether or not development will be under any great restrictions. The Government has not really made it clear how PPS6 will affect the pipeline. Until that comes out there is going to be a lot of uncertainty.”

Warehousing opportunities

Potentially, the changes PPS6 brings about could be highly beneficial to retail warehousing. More so than before, July’s draft indicated a possible softening towards out-of-town development.

“The downsizing and divestment of some operators has led to vacancies, but opportunities for new tenants have arisen from other retailers looking for new formats, such as Asda Living,” says Nathaniel Lichfield & Partners director Peter Wilks.

“However, the planning prospects for these changes and new out-of-town centre developments remain difficult. Proposed changes to central Government policy in PPS6 and the potential removal of the need test may provide an impetus for activity if and when the changes are implemented,” he says.

But with or without PPS6, free-market economics remain the same. Of course, retailers and developers take notice when the Government lays down the law, but when the guidance from the top is unclear it is left to the rule of supply and demand to take control.

And this is what is happening. There has been an inevitable tempering of the development appetite, but while the Government is clearly intent on supporting the town centres, this does not change the fact that the more traditional in-town retailers are now considering taking out-of-town retail warehouse space.

But this does not necessarily mean more developments. According to Raggett, the town centre’s loss will be out-of-town’s gain. He says: “In recent years there has been an increasing tendency for fashion and other retailers to take space out of town and, while this might have been complementary to town centre stores in some cases, in others it is beginning to put at risk improvements to the town centres.”

Perhaps more crucial to landlords at a time like this is not to have more space but to ensure that what they do have is up to scratch. And ensuring space is looking good helps keeps a location in line with retailer demand. Edgerley Simpson Howe partner Nick Howe explains: “Many scheme refurbishments are now being slowed down, phased or placed on hold until the market improves or deals are secured that allow sufficient increase in scheme value to justify these works. Others are being improved as a result of regearing older leases in order to kick-start the scheme once more.”

Maintaining interest

The only sticking point to this is that, just as with building new space, there is no point in investing the money if there are no retailers to take the space once it is complete. Updating and improving a centre is the first priority for developers needing to fill voids – to keep a healthy interest in a scheme it needs to stay fresh and inviting.

“There’s only so much retail development you can do,” says Rodbourne. “There won’t be the out-of-town boom that we’ve seen. The parks that are succeeding at the moment are the ones that have been able to constantly adapt to retailers’ demands. The crucial thing is to increase dwell time and diversify the tenant mix. They can’t rest on their laurels as being dominant in their catchment and then try to rely on one or two retailers to make them successful.”

As Rodbourne points out, the UK retail warehousing market is very mature. But some parts of it are more mature than others. The first generation of retail warehouse parks – which are a far cry from today’s mixed offerings – are starting to looking very old and dated. Retailers will be considering leaving centres where there is the chance to relocate to a more modern scheme down the road and developers will need to shape up if they want to keep them.

There is a finite amount of space for retail warehouses in the UK. Most towns and cities have about the amount of out-of-town space the catchment demands, which is why a slowing pipeline need not be the cause of alarm. Of course, the slowing economy has stemmed the momentum of development, but it was a slowdown that needed to happen.

The exciting changes in the market are happening on the inside. A changing of the guard is taking place between the dominant bulky goods, electricals and furniture retailers of this world and a new generation of fashion and food retailers.

What customers want

But as with the cooling pipeline, this change should not just be put down to the economy. Natural economic conditions dictate that consumers and retailers want the best offer possible. For shoppers, this will mean more large fashion stores and, even further down the line, larger food stores.

And this time next year we will know the extent of Best Buy and Fnac’s plans for the UK market. With the potential to be the most exciting additions to the market for years, on top of an already changing landscape, their progress will be under the microscope for some time.

Predictions are a tricky business, but one thing we won’t be saying over the next two years is that retail warehousing is dull.