Client Intu says cost of mall refurbishment and extension has soared following Bam’s departure
The budget for a major refurbishment and extension of a shopping centre in Watford has jumped 48%, just weeks after it emerged contractor Bam walked away from the job after failing to agree a contract value with client Intu.
In half-year results published today, Intu reveals it now expects the revamp of its Watford mall to cost £148m, rather than the original budget of £100m.
Intu ascribes the jump in project costs to “cost inflation” caused by booming demand in the nearby London market and a “re-defined” scope for the works, which now includes “existing mall refurbishments and improved ancillary services, such as upgraded car parks”.
The disclosure comes after Bam parted ways with the scheme after completing the pre-construction stage, as part of a two-stage tender for the main job, as revealed by Building earlier this month.
Bam said at the time that “ultimately we could not reach agreement with Intu on a sum that reflected an agreed view of the market and the management of risks”.
Despite the rise in costs, Intu said it still expected to make an “initial yield on cost of at least 7 per cent” and added that construction work on the scheme is due to commence in the fourth quarter this year. Intu declined to comment on the tender process for the main contractor role when contacted by Building.
Elsewhere, Intu is also planning to start on three other major developments over the next 18 months - Intu Broadmarsh, Intu Lakeside and Intu Costa del Sol - as part of a £1.5bn UK investment pipeline for the next ten years to add 2.6 million sq ft of new retail and leisure space. They are also on site at five restaurant and leisure projects costing over £100m.
The four new developments scheduled to start in the next two years have anticipated costs of £400m for Intu.
The firm did report that shopping centre development remained at “low levels with the majority of activity focused on extensions and reconfigurations” and this plus the changing face of UK retailers and their evolving multi-channel strategies has seen retailers target larger stores in prime locations.
Intu added that the case for deregulation of Sunday trading was “overwhelming” as “it would generate positive economic activity and create thousands of jobs”.