CACI’s Centre Futures projects the UK retail landscape 10 years into the future, drawing on a database of over 140 pipeline developments. Analysis of the development pipeline throws up some interesting trends, reflective of the wider UK retail market, with Brexit and uncertainty over the future of certain retailers limiting investment in some sectors, while the strong performing outlet centre sector is set to grow significantly.
 

What’s in the Pipeline?

The development pipeline tails off significantly after 2020, with landlords reluctant to commit to longer term projects in the current retail environment. The projects due to come online by 2020 were by and large committed to before the UK voted to leave the European Union on the 23rd June 2016.

Wales, the North East and the West Midlands are some of the regions anticipated to be most strongly adversely impacted by Brexit and these three regions have the smallest development pipelines. At the other end of the scale, London, the East of England and Yorkshire & The Humber are expected to be more insulated from any negative impacts and these regions continue to see higher levels of investment.
 

Volume of retail space to be added over the next 5 years by region

With the likes of Debenhams and House of Fraser closing stores, landlords can reconfigure space vacated by the department store anchors and Medium Size Units (MSUs) such as BHS and Marks & Spencer, without the need to add more space through extensions. With retailers generally looking to rationalise rather than extend their current portfolios, developments tend to be concentrated in larger, flagship centres with a focus on leisure, but even this area of the market has been affected with Hammerson delaying their proposals to extend Brent Cross.

Outlets set to Grow

Against this backdrop, the outlet centre market continues to grow and perform well. One of several factors driving this investment is the outlet centre model, with rents linked to the turnover generated by each store, in conjunction with typically shorter leases of between 5 and 10 years. This model gives landlords full visibility on the performance of each retailer and offers them the flexibility to reposition the offer to respond to market trends. ICON Outlet at the O2 opened on the 20th September and is the first of many outlet centre developments in the UK in the coming years.

Analysis from CACI’s Centre Futures shows there will be eight new outlet centres opening within the next five years, alongside extensions to McArthurGlen’s Cheshire Oaks and Ashford Designer Outlets, adding more than 200k sq. m. of space. These 10 developments alone, account for 11% of retail space being added within the UK.

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A More Creative, Engaging Future

These shifts in the market require landlords to think creatively about how they attract more shoppers, increase engagement and ultimately increase the value of their centres, rather than simply adding more space. For larger flagship destinations, centres are just as likely to be anchored by leisure operators and catering concepts as they are by traditional department stores, while smaller centres, particularly those which have come under the control of local councils, may have a community focus with libraries, health centres and other facilities sitting alongside the retail offer.

To find out more about how the retail pipeline might impact one of your assets or stores, or how we can help you assess development feasibility, please get in touch.