“Challenging” is how one agent describes the lettings market across the three counties. Simon Wild, associate director in the south and west retail department at Churston Heard, says: “There are slightly fewer requirements in the market, and in the past 12 months quite a few companies have gone into administration, which is reflected in the market.”
Colin Brades of Cluttons agrees: “There are very volatile trading conditions for retailers.”
The market may be down but it certainly is not out. “There are still requirements for the major towns, which remain fairly strong,” says Brades. “Prime space is still in demand and premiums still change hands.”
But fashion retailers – once the darlings of retail landlords – while still active, are driving hard bargains. “There is as much demand, but the prices paid are much more realistic,” is Brades’ take on the market. There has nonetheless been some rental growth. Wild cites County Mall in Crawley, where an extra £5 per sq ft zone A has been squeezed out of new tenants, taking the headline up to a record of £140 per sq ft.
He says there is prospect of further growth, but landlords will have to work hard to achieve it. Whitefriars in Canterbury and Maidstone town centre are the locations Wild believes are most likely to achieve growth this year.
Despite the dampening of the market, development activity shows no signs of caution. While there is one major scheme is set for completion this year – the Heart at Walton-on-Thames (see panel) – there are a number of weighty proposals in the pipeline.
Westfield’s and Hermes’ 270,000 sq ft The Friary, Guildford, and Crest Nicholson’s 250,000 sq ft The Atrium, Camberley, are due to be completed in the next two years, while the largest scheme – the 950,000 sq ft development in Crawley town centre – will not come on stream until 2011.
Robin Denness, director for development at Churston Heard, says: “You would expect a lot of interest from developers for retail opportunities in any decent town. The development side is looking healthy, but retailers are selective, so it has to be the right scheme in the right town.”
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Retail in Surrey, Sussex and Kent remains an attractive proposition to investors. Charlie Barker, partner, retail investment capital markets, at Cushman & Wakefield, believes the South East could outperform the rest of the country. “The little market towns are still very popular, particularly to private investors,” he says. For the institutions, larger schemes in centres such as Croydon remain attractive. A parade of three stores at North End, Croydon, is under offer for £13m, an initial yield of 4%. Barker points to other deals to institutional investors that are coming in at yields of 4-5.5%. “The South East has greater insulation against weakening demand than the rest of the country,” he says. |
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The Government Office for the South East has granted permission for Crest Nicholson’s 250,000 sq ft retail and leisure scheme The Atrium in Camberley. Meanwhile, Westfield and Hermes have secured outline planning permission for a mixed-use redevelopment, including 270,000 sq ft of retail, of the Friary Centre in Guildford. The scheme is now going through a CPO inquiry. Work on O&H Properties’ £100m retail and residential extension to the Heart centre in Walton-on-Thames is due to be completed this autumn, with Desire by Debenhams as the anchor. Grosvenor is working up a masterplan for a major regeneration of Crawley town centre, including 950,000 sq ft of shops. A planning application should be submitted next spring. Bride Hall and Warner Estates have started work on the 200,000 sq ft Bouverie Place in Folkestone, due to be completed next summer. Tenants include ASDA, George, Bhs and Next. ING Britannica’s County Square centre in Ashford is undergoing a 200,000 sq ft extension, set for completion in spring 2008, with prelets to Debenhams and Next. Edinburgh House has secured planning permission for a 90,000 sq ft extension to St George’s Centre, Gravesend. |
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