Major retail developments ‘are finished’

Scotland has reached “peak retail floor space” and the slowdown in retail projects will impact on housebuilders, whose own developments are often made viable by big megastores opening nearby.

Experts say this lack of growth in retail will force local authorities to rethink their planning policies.

The flattening of retail development marks the end of a 40-year trend of consistent growth which has underpinned development models used by local authority planners.

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Mark Robertson, a partner with property agency Ryden, told a property meeting last week that there would be redevelopment of existing retail floor space once the economy has recovered. But the shift to internet shopping and more efficient use of space in major existing centres means an end to building big new shopping malls.

He said redevelopment of shopping centres such as the St James Centre in Edinburgh was not likely to begin until 2018 “at the earliest”.

Robertson said: “Because we are in the tail-end of a recession, the superstores will be building much less, and there are no shopping centres opening in Scotland this year and none planned until the end of the decade.

“Consumer expenditure has grown at more than 3 per cent every year for the last 40 years. There have been new shopping malls, retail warehouse parks and superstores as long as we all can remember.

“The pause in the market we are now seeing is because consumers are spending less, and any forecasts of growth are lower than they have been because a lot of that expenditure is migrating to the internet.

“There will be a requirement for format change – replacement retail floor space will be more leisure-orientated, but are we going to build more retail floor space?”

Robertson predicted a “second housing crash” as a result of a decline in new superstores, which housebuilders have relied on to provide upfront costs charged by councils to develop infrastructure.

Food retailers such as Asda, Sainsbury’s and Tesco would continue to develop smaller-format “local” stores, but he expects a decline in large supermarkets which previously competed for and paid “multimillion-pound” upfront costs on behalf of developers.

“The second wave – the first was caused by the housing market crash – is going to be more subtle but will be caused by superstores withdrawing from expansion,” said Robertson.

“In the previous boom to 2007, residential development was throwing off so much profit that it could pay for as much planning gain as the developer was willing to yield, which paid for roads, railway station upgrades, schools, health centres.

“Now, with the retailers saying they will expand much less quickly, they may pay substantially less for a site because there will be less competition.

“If that is going to fade as well, there will be a number of sites that will suddenly not be viable.”

The withdrawal of food retailers from building new large-format superstores would have a knock-on effect on a number of projects, including a new stadium being planned by Scottish Rugby Union and Edinburgh City Council for the Meadowbank Stadium site.

Ben Wilson, principal planner for the council, admitted that planners would have to “rethink our approach to planning policy”.