Just five months after securing planning permission for a £400m extension to its Buchanan Galleries mall, Land Securities called a halt until nearby rail improvement works are completed. Yet local agents suspect the change of heart is as much down to a lack of occupier demand.
The 392,000 sq ft extension to Glasgow’s principal shopping centre was originally scheduled for completion by Christmas 2017. It would boost floorspace to 1.2m sq ft and be anchored by a 150,000 sq ft Marks & Spencer, reconfigured 300,000 sq ft John Lewis and a 10-screen Showcase Cinema de Lux.
As well as delivering £310m of private sector investment, the development had secured £80m of public realm and infrastructure improvements, funded using tax increment financing.
Yet in July, shortly before enabling works were due to begin, the developer pulled the plug, blaming a clash with nearby rail improvement works.
LandSec has said little since issuing a statement back in July which said: “We are not currently pursuing the existing plans for the extension of Buchanan Galleries due to an increased level of risk generated by the simultaneous delivery of the Edinburgh Glasgow Improvement Programme.”
The £742m EGIP incorporates electrification of the Scottish rail network, including the main line between Edinburgh and Glasgow. Land Securities would have been extending the shopping centre over the railway lines of Queen Street station.
The statement added: “We will continue to work on our plans to extend Buchanan Galleries as Network Rail delivers EGIP over the next 18 months.”
More than five months on, a LandSec spokesman says: “Nothing has really changed. There is a lot of risk associated with delivering the two projects at the same time and when the rail work is complete, we will revisit our plans.”
LandSec insists it is in regular contact with its three anchor tenants and that relationships remain strong. Yet, even if the anchors are willing to sit tight, the fact that less than 40% of the scheme was prelet back in May puts a question mark over the strength of demand, say local agents. They point out that, as a rule of thumb, developers will want at least 50% of a scheme committed before they push the button.
“I think it’s pie in the sky,” says Alastair Biggart of Glasgow agent Biggart & Co. “The upgrade of the rail line would have made it prohibitive [because of the electric power supplies] and once that rail work is complete it will be even harder to get the extension delivered.”
Glasgow already offers more than 5m sq ft of shops and retail agents argue that makes it difficult to justify additional space.
News that the extension has been delayed will provide a boost to other city centre retail pitches.
Sauchiehall Street, for instance, was left reeling when M&S announced it was to close its store to anchor the new extension. Values fell dramatically as the market predicted a retail exodus.
Ross Wilkie, director of retail agency at Colliers International, says: “It was the street hardest hit by Land Securities’ plans and now has the opportunity for some kind of recovery with retailers knowing M&S will be staying for at least a couple of years.”
Peacocks is under offer to take the former HMV store next to M&S, demand is encouraging for the two new retail units in KKR and Quadrant Estates’ Sauchiehall Building, and agents say retailers on the street are now more willing to extend their leases.
It is also hoped that the rates revaluation in 2017 will make the street an even more attractive option as occupational costs are set to come down.
Meanwhile, the jewel in Glasgow’s retail crown, Buchanan Street, goes from strength to strength. The high-value thoroughfare was named in Cushman & Wakefield’s Main Streets Across the World report as the UK’s most expensive retail destination outside London.
Recent deals with the likes of Michael Kors, Massimo Dutti and Hawes & Curtis have further improved the street’s credentials and raised the rental tone.
“When you look at Buchanan Street [zone A] rents since 2007, they have remained remarkably stable,” says Paradigm Property Consultants’ Martin Gudaitis. “They held up at £250 per sq ft throughout the recession and a recent deal with EE at £260 per sq ft demonstrates that prime rents are starting to grow.”
Rumours are that Swatch is set to pay a record £279 per sq ft to secure space. It is a small unit and may not give a genuine feel for rental tone, but most ag ents agree Buchanan Street zone-As have risen to about £265 per sq ft.
Other surrounding streets are also putting in a decent retail performance. JD Sports is about to open a 23,500 sq ft store on Argyll Street, and in December Emporio Armani will open on Ingram Street within BAM Properties’ mixed-use development, CONNECT110NS.
“Whether the Buchanan Galleries extension goes ahead or not, retailers will still have their eye on Glasgow,” says Wilkie. “Some might hold back to see what happens, but if an opportunity presents itself, they will turn their attention elsewhere in the city.”
Leisure time
There may be a question mark over retail demand in Glasgow but, like most UK cities, it has seen a surge in demand from leisure operators. Restaurateurs have flocked to the city and many were keen to sign up for additional units at the Buchanan Galleries extension.
Recent arrivals in the city centre include Bill’s, Five Guys, Byron and Las Iguanas as pitches such as Merchant City and St Vincent Street draw the crowds. Out of town, the Silverburn leisure extension has 11 new restaurants, while agents say Glasgow Fort’s new Wagamama is reporting eye-watering takings.
Kevin Sims, Glasgow retail director at CBRE, says: “There has been unprecedented leisure demand over the last 12 months and the likes of Wahaca, Burger & Lobster and Itsu are likely to come to Glasgow whether the Buchanan extension goes ahead or not.”
According to Sims, leisure rents, which have historically stood at £25 to £30 per sq ft, are now in excess of £40 per sq ft. There are rumours that Nando’s was prepared to pay £60 per sq ft to secure space in the Buchanan extension.
Agents agree the bubble will burst, but there are no signs yet. Operators that may have been poised to sign up with LandSec will happily do so elsewhere in the city centre and landlords are providing appropriate space to accommodate them.
“Planners have been willing to relax consents and, given the appetite, I can’t see demand abating any time soon,” says Savills’ retail director Ross Allardice.
Sauchiehall Building owners KKR and Quadrant Estates are about to lodge an application to reconfigure it to include a coffee shop and restaurant units.
Gavin Anderson, partner, retail and leisure, at Montagu Evans, says: “We are under offer on one unit and about to go to legals on another. We are talking to national brands.”
Meanwhile, Blackstone and Sovereign Centros has put the 850,000 sq ft St Enoch shopping centre on Buchanan Street on the market. Agents predict the new owners may embark on some sort of leisure extension.
