The government's planning restrictions on out-of-town retail developments – issued in planning policy guidance note PPG6 in 1996 – are taking effect. No more car-friendly, American-style shopping malls will be built outside British cities in the foreseeable future. But the boom in town- and city-centre shopping centres expected as a result has yet to materialise. Pundits predict that it could be two to three years before many town- and city-centre projects emerge because urban schemes take longer to get off the ground.
New research into the retail shopping centre market, published by analysts at chartered surveyor Hillier Parker in January, presents a gloomy picture. The number of shopping-centre developments in the pipeline, both in and out of town, has fallen during the decade. New floor space in 1998 totalled 4 million m2, half the early 1990s high of 8 million m2. In 2000, the number of out-of-town shopping centres scheduled to open will drop to one. Hillier Parker's report predicts that, in the same year, 26 smaller town-centre schemes will open – four more than in 1998.
Legacy of the recession
However, the report also says there is little sign that the government's clampdown on out-of-town shopping-centre development is stimulating growth in town-centre development activity. Analyst Mark Teale says this never really recovered from the recession of the early 1990s.
"Town-centre development is very costly. There are planning problems, sometimes sites have to be decontaminated, existing buildings need to be knocked down, and a certain level of economic activity is needed before development becomes viable," he explains.
For contractors such as Bovis – the construction manager that cornered the market in large retail developments, including Bluewater Park and Manchester's £230m Trafford Centre – the figures appear to be bad news. The retail sector accounts for about 20% of Bovis' UK-generated profit and the contractor has teams dedicated to retail work. At its peak, 60 Bovis staff, mainly project managers, were working on Bluewater.
But, according to a spokesman, the firm is not worried. "The retail market might be changing in nature but it's certainly not burned out," he says. He points to major inner-city development prospects such as the £200m White City shopping complex in west London and the £800m Bull Ring and Martineau Galleries dual scheme in Birmingham as evidence that the urban retail sector is alive and kicking. Bovis is confident enough not to be planning staff cuts; in fact, it is recruiting more project managers. The firm is also targeting the pharmaceuticals market to make up the shortfall.
Benoy Associates, architect on the Bull Ring scheme and Bluewater Park, relies heavily on the retail sector for work – 75% of its fee income comes from shopping-centre design. Chairman and managing director Graham Cartledge says: "The energy for out-of-town development has already disappeared." The practice is looking to European countries with more relaxed planning regulations for big schemes – Cartledge says the firm finds profit margins too tight on smaller schemes. It has just completed a £15m-20m factory outlet scheme in Austria and another of similar size in Perpignan in the south of France.
Cartledge hopes that links with developers such as Lend Lease – the developer for Bluewater – and Hammerson may provide more European work. He claims the Bluewater job has already netted the firm enquiries from European developers.
European prospects
Following the European trend, architect Chapman Taylor is looking eastwards and is already working in the Czech Republic, Germany and Belgium on projects in the £30m-50m range. Another retail specialist, BDG McColl, is also looking further afield for work with shopping-centre projects on site in Malta, Vienna, Strasbourg and Paris.
Other consultants are concentrating on UK refurbishment schemes. Even if new centres are not being built, older complexes need work, and retailers prevented from going out of town are instead expanding existing in-town premises. Cyril Sweett is strong in the retail refurbishment sector and, says chairman Francis Ives, has "15 or 20 schemes, mainly prospects," in its sights.
Ives is one of the few who is prepared to admit that the retail sector is likely to dip – "for a year or so" – before town-centre schemes re-emerge to provide new-build work for the industry. "The dip is controllable," he adds. "The industry is having to adjust to a new planning regime, and it takes time. What we're looking at is a correction in the market, not a recession."
Gordon Watson, director of BDG McColl's architecture team, agrees. He sees long-term potential for city-centre projects. "Virtually every developer in the UK has briefed its agents and surveyors to find town-centre sites," he says. He also points out that city-centre projects take a long time to come to fruition. "We first drew designs for a new shopping complex in Exeter town centre in 1993 and it's only just going in for planning permission," he says.
Instead of waiting for the market to pick up, many firms are looking to new markets to make up a shortfall in revenue. Cyril Sweett, for instance, is working on more airport schemes. "Airports now make more money from retail than they do from air traffic," says Ives. "It's 10% of our fee income now and we'd like to see it grow to 20%."
Strength in the long term
No one is talking about abandoning the retail market, and Hillier Parker's Teale has some encouraging words for contractors and consultants. "They are right not to get very gloomy about prospects in the sector. It's just that we're not seeing boom conditions."
In the long term, he sees the market regaining strength, particularly if the government intervenes and makes it easier for developers to purchase parcels of brownfield and city-centre land, as the urban taskforce is likely to propose. "Supply of shop space in town centres has been limited for a very long time," he says. "Lots of retailers have found it extremely difficult to implement expansion plans because of the chronic shortage of available sites. At some point, that pent-up demand will push up rents and stimulate development activity – but that's probably two to three years away."
