Scotland’s two biggest cities are set to draw in more than £1 billion of major retail investment while smaller town centres struggle for survival, a new study today reveals.
The research suggests that while the largest centres of population strengthen their dominance, secondary locations continue to face pressures on rents and the prospect of “two long years” before the next rates revaluation takes post-recession values into account.
Traditional high streets in provincial towns continue to declinePeter Muir of Colliers Scotland
Colliers International’s latest annual retail report highlights two key shopping developments, Glasgow’s expanding Buchanan Galleries and the new St James Quarter in Edinburgh, replacing the St James Centre, which together are estimated to represent about £1.25bn of investment.
Property experts point out that in-town retailers continue to be “highly selective” on aspects such as store size, configuration and the structure of the overall property deal. They say some “notable” chains are still searching for prime Scottish stores, including Victoria’s Secret and American Eagle.
But while Glasgow and Edinburgh lay the “foundations of growth”, smaller retail centres will be left “limping towards a rates review”, according to the report’s findings.
John Duffy, director of in-town retail with Colliers International in Scotland, said: “Evidence of the strengthening in-town retail market is the real progress being made on the significant redevelopment of Buchanan Galleries in Glasgow, pictured below, and the St James Quarter in Edinburgh.
“The key driver is an improving retail market, with significant pre-lets for the Buchanan Galleries extension to the likes of M&S and Next, as well as a ten-screen cinema by Showcase Cinema de Lux.”
Peter Muir, head of rating with Colliers Scotland, added: “There is no doubt that the retail sector… has suffered in a sharp decline in headline rentals, in particular the outlying parts of the established city centres of Glasgow, Edinburgh and Aberdeen.
“Traditional high streets in provincial towns continue to decline, a particular example being Paisley, which is showing an average reduction in rental levels of 54 per cent between 2008 and 2015. Other towns include Ayr, down 35 per cent, and Falkirk’s 33 per cent fall. Scotland as a total averaged a decline of 23 per cent.”
Edinburgh’s St James redevelopment, estimated at some £850 million, will provide one million square feet of new retail space in a scheme that will then account for 21 per cent of Edinburgh’s prime retail offer.
Meanwhile, Glasgow council approved Land Securities/Henderson Investors’ £400m extension to Buchanan Galleries earlier this year. That project is anticipated to generate an additional 1,500 jobs and create 450,000sq ft of retail space.
Colliers said Scotland’s strongest retail parks were continuing to evolve, with landlords competing “aggressively” to attract the most diverse range of retail and leisure operators.
The latest research examined 421 retail locations around the UK and revealed that 324 experienced a reduction in rental values between 2008 and 2015, 21 showed no change and 76 (or just 18 per cent of those surveyed) showed increases in rental levels.
Across the UK last year there was £4.6bn of overseas investment in retail property. While this was only slightly ahead of 2013, the trend this year appears to be quickening, Colliers noted.