Demand for New Retail Space

More than 2.7m sq ft of new retail space is due to open in UK shopping centre developments next year. However, more than half of that space is made up of extending existing centres. Sarah Davis looks at why.

So what is driving this move towards more investment in improving existing centres rather than new builds? Let’s look at the factors working against new builds, before considering the trends fuelling the need for existing centres to expand and improve.

New build projects require significant investment

The first and most obvious reason is the additional risk and cost of establishing a new build project and taking it through the development process.

It takes a long time for a new shopping centre to come to fruition - typically between 10-20 years. Developers don’t want to hit the building stage during the depths of the recession, so ideally want a stable economic environment and prospect of a prolonged boom to forge ahead.

Although markets are not as bleak as in 2008’s recession, the increased political uncertainty around the world has impacted economic confidence and stability in the short to medium term.

This uncertainty may also stall consumer confidence and cause a slowdown in spending.

Additionally, the rise in online shopping is leading to reduced footfall for retailers with physical shops. So although the number of retailers has grown if you include online outlets, consumer demand has not, which means a potential oversupply. 

The lack of new space

In our small and already overcrowded country, the supply of ample land suitable for new retail developments is also becoming more scarce, or much more complicated to bring together. By refurbishing or extending existing centres, planning permission is much easier to achieve and it also fulfils the landlord’s need to keep their offer fresh in an ever competitive retail environment.

The lure of ample space was what originally motivated retailers to move away from the constrictions of the city high street towards large out-of-town shopping centres, such Lakeside, Bluewater, Metro Centre and Meadowhall. This space allowed free parking, easy access and more room to service and deliver the experiences demanded by the modern shopper.

Though these spatial benefits still stand, size is no longer everything and offering the biggest spaces isn’t the only means to attract shoppers. That’s why existing centres are upping their game to increase their pull - to entice shoppers from further afield and away from their computers.

Improving existing centres creating a more appealing environment for shoppers

One reason shopping centres successfully attract shoppers, and in turn satisfy retailers, compared to the high street is that they deliver an appealing and cohesive shopping experience.

Installing large department stores, such as John Lewis and Marks & Spencer as anchors traditionally worked well on the footfall front. But shoppers are now also looking for more variety so adding ‘new’ brands, experiential events and leisure facilities enhance the ‘destination’ appeal of a shopping centre and get visitor numbers up.

Centres under single ownership are best placed to deliver the additional facilities that shoppers demand. This helps to increase footfall, dwell time and loyalty to the benefit of all retailer occupants.  For the landlord, adding these new facilities maximises value from land they already own, reducing land costs and increasing the yield on that existing development.

Intu - the owner, manager and developer of prime regional shopping centres in the UK such as Gateshead’s Metrocentre and London’s Lakeside - is one operator doing this successfully. For each of its centres, it produces lifestyle magazines, seasonal promotion events and fashion workshops to add appeal for shoppers - as well as adding new leisure facilities.

Combining shopping with dining and leisure

What is common to these shopping centre expansions is the increasing amount of new space dedicated to leisure facilities, as owners look to address the latest retail trend. According to recent figures, almost a fifth of units in the UK’s top 30 shopping centres are leisure focused to help drive the next generation of customer engagement.

Leisure, shopping and dining are becoming inexorably linked, with eating or socialising becoming as much of a reason to visit a shopping centre as buying goods.

Indeed, recent findings by CBRE revealed that a third of all visitors to shopping centres across Europe, South Africa and the Middle East will visit a shopping centre just to eat or drink. According to this research, four out of 10 will then go on to shop, even if their original reason for visiting the centre was to eat or drink.

Evolving consumer shopping habits and working patterns has also influenced when people visit malls. According to an intu survey, two in five people are now going to a shopping centre during the week, as opposed to the weekend. So leisure activity is helping to justify extending the shopping day and centre opening hours.

Confirmation of this leisure trend can be seen in the latest proposals submitted last month for extending Meadowhall shopping centre on the outskirts of Sheffield. A £60m renovation project is already underway and the centre owned by British Land is now wants to invest £300m in a new 330,000 sq ft leisure hall.

This extension will provide entertainment and dining offerings to help the shopping centre become a more experience-led destination. Proposals include creating a new outdoor dining terrace plus replacing the existing cinema, adding a gym and a flexible leisure space for indoor golf or ten-pin bowling.

The arrival of big leisure operators

Considering this trend, large leisure operators are playing a bigger role within shopping centres. Intu Trafford Centre already has a Legoland Discovery and Sea Life Centre and intu Lakeside has announced plans to introduce Nickelodeon’s first UK shopping centre attraction.

This family entertainment centre will form part of intu Lakeside’s 225,000 sq ft leisure extension due to open in 2018, featuring adventure zones, attractions and themed rooms designed for kids’ birthday parties, as well as a dedicated dining area and retail space.

In conclusion, what’s clear is that consumer needs are getting more complex and demanding, so building more enticing layers of appeal onto already established shopping centres may be a quicker and easier route to attract customers. Thereby generating higher footfall, greater consumer spend and return rate for retailers and shopping centres.

If you are a retailer or shopping centre owner looking for advice on how to maximise value from your retail offering, please get in touch.

Sarah Davis

If you’d like to stay up to date with what we’re up to, our email newsletter contains the latest news, viewpoints and events from the Prosper team and is delivered for free, each month, to registered subscribers.

Subscribe by clicking the link below.

Sign up to receive Prosper’s Insights, News and Views

Areas of interest

We won't share your details with anyone else.
Privacy Policy

back to Insights