Agents regularly state that the Cineworld multiplex in Glasgow’s Renfrew Street is one, if not the most, profitable for the chain in the UK. It would make sense as Cineworld has the monopoly in the city centre, with only a small independent cinema for competition, but that could change quite dramatically with talk of possible plans for two new cinemas over the next few years.
Land Securities has incorporated plans for a multiplex in its Buchanan Galleries extension. Vue was originally signed until the scheme was put on hold during the recession, but the proposals are back up and running again, with outline planning granted in April (see below).
At MAPIC earlier this month the developer launched new images of the scheme, but the whispers are that Vue isn’t the only contender for the cinema. Land Sec has an existing relationship with the Everyman chain having signed the operator to its Trinity Leeds scheme – which has led some to suggest the firm may be an alternative. Rumours circulating at MAPIC also suggested Showcase might be in the frame.
Whether that proves true may be revealed sooner rather than later. Nick Davis, development director at Land Sec, admits the firm has had a number of offers from cinema operators, but one has been selected and will be announced soon.
No doubt the new owners of the 24-year-old St Enoch.
However, it also raises the question as to whether Glasgow could support three city centre cinemas, should the new owners of St Enoch follow that path. Kevin Simms, director and head of retail at CBRE, comments: “We would potentially reach saturation point if there were three cinemas as we have cinemas opening out of town at Silverburn and the Fort.”
Whichever operator signs at the Galleries will be important. For instance, Everyman is a more upmarket brand and would arguably cater for a different audience to Cineworld leaving an opening for a second, more mainstream, operator to move in elsewhere.
The increase in cinema screens will follow a surge in dining options in the city centre. Like elsewhere in the UK, the restaurant sector has been most active and the landscape in Glasgow is changing rapidly. Once diners would head to the Merchant City or the West End with just a few restaurants tucked away above shops in secondary retail streets in the city centre.
But that is changing. Recent high-profile openings include Thai restaurant chain Chaophraya which took a former town house on Nelson Mandela Place, just off Buchanan Street.
Ironically, the former Odeon cinema on West Regent Street is being redeveloped to provide much sought after space for casual dining operators on the ground floor. Giraffe is rumoured to be under offer for one of the units.
Simms comments: “There is no let-up in demand for Glasgow, Edinburgh and Aberdeen. Restricted supply means rents are being pushed up to £30 per sq ft and are heading north.”
In Glasgow, John Menzies, partner at Cushman & Wakefield, says operators want to be near Buchanan Street but not on it, pointing to recent deals with Las Iguanas and Patisserie Valerie. He also cites names such as Byron, Coast to Coast, Mitchells & Butlers and Miller & Carter as being on the lookout for potential space.
It bodes well for the Buchanan Galleries extension. The cinema will be part of a wider leisure offer that includes restaurants – something Land Securities has succeeded with at Trinity Leeds, which opened in the spring.
Davis comments: “What we’ll have at Buchanan Galleries is daytime and evening leisure which will have a critical mass that isn’t available in Glasgow at present.”
If perceived demand for cinemas and restaurants proves fruitful, Glasgwegians could soon be spoilt for choice.
Buchanan Galleries extension
It was on, then it was mothballed during the recession, but now it seems Land Securities and Henderson Global Investors’ £100m extension to the Buchanan Galleries shopping centre in Glasgow is definitely back on. Outline planning has been approved and Marks & Spencer has re-signed as the 150,000 sq ft anchor. Talks are advanced with a cinema operator (see main text).
A prelet threshold of 40% by income is required before development can commence but Land Securities development director Nick Davis is confident of that being reached and a start on site in Q4 2014.
The announcement of Marks & Spencer as the retail anchor hasn’t caused a great deal of excitement among retail agents who are keen to see new names among Glasgow’s shopping offer.
Martin Gudaitis, partner at Montagu Evans, explains: “M&S has a good network of stores already so there is no point of difference.”
Davis says Land Securities is looking to attract fashion retailers,but in particular international fashion brands and says conversations are under way.
Investors shop for shops
Some £579.5m of retail investment has been transacted in Scotland in the first three-quarters of 2013 compared with £302.1m for all of 2012, according to Colliers International. Foreign investors, often fronted by UK asset managers or institutions, have been looking to boost their portfolios away from the overheating market in London.
Yields have compressed – 5.5-6% for the most prime assets – but some express doubts as to whether the shopping spree will be able to continue.
The issue will be one of stock rather than a lack of buyers. Tom Fulton, investment director at Colliers International, comments: “We are not going to see a Braehead or a Silverburn or anything of that nature coming to the market as they are all under long-term owners.”
Several of the recent deals have involved assets with potential to grow value, with buyers taking a longer-term view. The most notable example is the St Enoch Centre in Glasgow city centre which was bought by Blackstone and Sovereign Land for £190m. The 1m sq ft centre has some vacant units and potential to reconfigure and reposition (see main text).
It’s a vicious cycle. The more buyers who buy to hold assets the less stock there is to potentially buy which puts off those who might sell, as there is nothing for them to subsequently buy. In the meantime, stock that does become available is often going to best bids, something the market hasn’t experienced for some time.
Douglas Wood, associate at Montagu Evans, cites 123-129 Buchanan Street – the prime retail location in Glasgow – as an example. SWIP is buying with the retail units at ground floor reflecting a yield of sub-5%.
“It’s really good for the street and shows continued belief in rents holding up,” he says.
But Fulton proffers words of warning. “Yield compression hasn’t been the result of the performance of the retailers but because of market sentiment and there are still fundamental concerns about the market at the moment – it will be interesting to see how Christmas trading goes,” he says.
In the meantime all eyes will be on the Overgate Centre in Dundee which Land Securities has put up for sale for £125m, reflecting a yield of 7.5%.
Stacey.Meadwell@estatesgazette.com
