In-depth: City developers down tools

Published on Wednesday 18 May 2011 16:29

THE company behind the £850 million revamp of the St James Centre today admitted for the first time that work will start on site a year later than planned - as it emerged that £6 billion worth of development in Edinburgh has ground to a halt.

Henderson Global Investors' ambitious development of the new St James Quarter will not begin until a series of complex negotiations with the city council, planners and existing tenants of the centre are concluded.

The London investment firm is now estimating that the eyesore St Andrew House will not be demolished until 2012, and the St James Centre will remain open until early 2013 - a year later than originally planned. But it insisted that, despite the delays, the project can still be finished in time for the scheduled completion date of 2016.

News of the delays came as a new official report showed that 6bn of development sites are lying empty across Edinburgh despite having valid planning consent in place. Other major sites where development has stopped include Caltongate, the former Fountain Brewery and parts of Leith Docks.

The St James Quarter scheme is seen as a key development for Edinburgh's city centre and is expected to breathe new life into the east end.

A spokesman for the St James Quarter said: "A development of this scale is a dynamic process involving significant logistical challenges. The programme is constantly reviewed as some elements are viewed to take longer and others shorter once a detailed assessment of each task has taken place.

"The earliest date for work starting on site would be towards the end of this year, but there are many hurdles and elements that need to be solved before this can be confirmed. St Andrews House is currently scheduled for demolition in 2012.

"The logistics concentration has been to keep the shopping centre trading for as long as possible whilst aiming to deliver the new shopping centre opening in 2016. We are looking into the possibility of the shopping centre trading throughout 2012 with demolition commencing in early 2013."

Across Edinburgh, 6.06bn of developments have planning consent but are not under construction, according to the city council's new development activity bulletin, which is slightly lower than the 6.2bn of work that had consent in 2009.

The value of development that is under construction fell by 27 per cent to only 1.1bn in 2010, while only 496,000 of work was completed, compared with 839,000 in 2009.

Most of the schemes have failed to get moving because of the financial collapse of the developer, difficulty in securing funding and the inability to find occupiers.

Among them is the former Tartan Club social club site at the old Fountain Brewery, which council-backed developer Buredi had planned to turn into 170 flats and an office complex as part of an 80m development before it collapsed into administration.The site is now owned by Buredi's biggest creditor Royal Bank of Scotland' investment vehicle West Register. James Thompson, director of business space at property firm DTZ, who is acting for West Register, said many sites across the city are now under review. "Quite a lot of activity at the moment is stifled, in part by the fact that the market has seen transition, and also because it is very difficult to get development finance," he said.

"But we are slowly seeing a situation where grade A office space is diminishing and, bearing in mind where we are in the cycle and the fact that there are a lot of lease expiries coming up in 2013/14, we are now edging towards a position where landlord will be in a better bargaining position. That will make it more likely that developers can start schemes."

During the course of 2010, the amount of development that was completed, under construction or subject to a live planning application fell by four per cent, to 9.6bn. The decline followed an eight per cent year-on-year reduction in 2009 - meaning the figures are well down on 2008.

But city leaders insist they are continuing to see strong interest in the city from investors and are confident interest in development will continue to rise.

Councillor Jim Lowrie, the city's planning leader, said: "Although the investment figure is slightly down from last year, the overall trend for development is on the increase and the council will continue to work with business community to ensure that continues to move in the right direction."