Struggle to get firms to sign up for Scottish Provident building

Published on Saturday 6 June 2009 11:33

ONE of the city centre's biggest new developments is facing lengthy delays as the firm behind it struggles to get companies to sign up before beginning work.

Australian developer Stockland today said it wants to tie up tenants before starting on its shops, office and apartments project at the former Scottish Provident building on St Andrew Square.

But pre-lets are becoming increasingly difficult to secure – especially for office buildings – meaning the scheme could be put off for several months or more.

Demolition had been scheduled earlier this year but the firm has said it does not know when work will get under way.

It wants a significant number of firms signed up to the scheme, which includes at least eight two or three-storey shops and will be the biggest retail development in Edinburgh since the opening of Harvey Nichols.

Development experts say it would be no surprise if schemes like Stockland's do not start until the market improves significantly. Ken Lindsay, managing director of Stockland in the UK, said: "The world is a tough place and there aren't queues of tenants out there but there is some early interest and we are in discussion with anybody who has a serious interest.

"In some respects (the starting date) is driven by level of tenant interest in the market. We're continuing with discussions with contractors and that will go on in the coming months."

He admitted that it would not be possible to secure pre-lets for the whole building ahead of starting work but said some interest is needed before work can begin.

"We are keen to do it as fast as we possibly can but we all live in the marketplace," he said. "Clearly you have to have some level of interest from tenants. It is a very large project and just to build it entirely speculatively is not something sensible people would do.

"The process, because of the economic climate, is taking longer. There are potential tenants out there who we are in discussion with but in the economic climate tenants are taking longer to agree pre-lets."

The firm has been carrying out a full strip-out of the interior of the buildings and is in discussions with potential contractors regarding carrying out the demolition work. Mr Lindsay also said that the firm is to discuss with city planners any "minor changes" that can be made to the design without deviating from the existing planning consent.

Stewart Taylor, a director of business space at property firm CB Richard Ellis, said: "For every developer, if they haven't started a scheme then they won't at the moment as it can be very difficult to make it stack up.

"While many people have the view that we have reached the bottom, for developers it is a question of when there is a recovery in demand and yields. Until then, it will be very difficult for a developer to press the button.

"It is also very difficult to secure funding at the moment and, no matter how much belief a developer has in a project, they still have to be able to fund it.

"It would be a brave developer who would press the button today on a larger scheme."