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7
ANALYSIS
Lettings improve
Retail vacancies are set to fall during 2010, according to King Sturge. But secondary
centres will remain vulnerable
In King Sturge’s annual Property
Predictions, the consultancy’s head of
retail, Charles Miller, forecast that vacancy
rates would recover from their nadir of
around 20 per cent to around 10-12 per
cent by the end of 2010.
Many retailers have been reporting solid
Christmas sales figures, and encouragingly
for profit margins there has been less
over-stocking in evidence. As a result, Miller
forecast: “There’s going to be a temporary
respite for retailers, and so there will be more
of a balanced market going forward.”
But he warned that the picture would
continue to be patchy. “There’s an increasing
divide between the good and the secondary
centres in terms of occupational take-up,” he
said. “The rates will be higher in some centres
as the recession continues to cruelly expose
towns that are failing, highlighting the ongoing
need for regeneration.”
Miller said that occupier demand is not
dead, but retailers were being very selective
and opportunistic. As a result, he forecast: “The
negotiating position is going to stay with the
tenant, so landlords beware.”
Against this backdrop, King Sturge is
predicting that average retail rents will fall
by 3.1 per cent in 2010 and by a further 1.3
per cent in 2011. It will not be until 2012
that rents start moving forward again, and
this will provide a brake on the investment
performance of shopping centres.
The lack of rental growth means malls are Buy, Next Home and TK Maxx Homesense. excessive supply down the road could hold
likely to be the worst-performing sub-sector And Pritchard added: “There is a sense now back growth,” he said.
of the UK commercial property market this that the occupiers who remain are likely to be Miller reiterated his earlier calls for
year. King Sturge is forecasting a total return survivors and that the scarcity of good parks government action to help iron out the peaks
of 11 per cent for shopping centres in 2010, is such that buying now for the medium term and troughs of the development cycle, in
against 13 per cent for the commercial market will not be regretted.” particular through the introduction of Tax
as a whole. Looking further ahead, Miller warned that Increment Funding which would allow local
By contrast out-of-town retail parks are the development market was in danger of authorities to be more confident about
likely to be among the top performers, with repeating the boom and bust cycle of the past bringing forward retail-led regeneration
a total return of 14 per cent. King Sturge’s decade. of their town centres. “More than ever,
head of UK investment Neville Pritchard said: “In a very difficult market the supply regeneration issues require innovative and
“Investors will continue to embrace the best pipeline has been derailed,” he said. “However proactive approaches,” he concluded.
quality retail parks, once again attracted by the the next wave of development is already being
value of limited Open A1 planning consents.” lined up for 2012/13, when market conditions Find out more:
King Sturge has registered 60 active are forecast to be more conducive to new For more information, please contact the author or
requirements for retail park space from a supply. visit the website:
range of operators, including some high “With this lumpy supply we’re in danger www.shopping-centre.co.uk/development
profile brands like John Lewis Home, Best of building up a longer-term problem and graham.parker@jldmedia.com
www.shopping-centre.co.uk January 2010 SHOPPING CENTRE
07-SCJan10-Analy2.indd 7 14/1/10 18:53:47
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