Some retail-led mixed-use or regeneration schemes may be made viable by the go-ahead for a form of tax increment financing.
Confidence in the U.K. retail property sector is returning, judging from the enthusiasm and deal negotiating evident at the annual British Council of Shopping Centres (BCSC) Exhibition and Conference held in November in Manchester.
Sustainable construction was a major issue at the conference. Statutory requirements for energy efficiency are due to rise at a challenging rate in the U.K. in the next eight years, and so far retail buildings are trailing office and residential developments in improved performance.
Land Securities plc, one of the biggest U.K.-based property companies, has already secured BREEAM (British Research Establishment Environmental Achievement Method) Excellent rating awards for some of its office schemes. Now, the firm is focused on its retail properties.
Terry Hartwell, property director of expanding food retailer Wm Morrisons Supermarkets, told an audience of property professionals that the chain, currently the fourth largest in the U.K. groceries market, plans to open over 2 million square feet (186,000 sq m) of gross leasable area in the next three years.
Retail schemes now going forward include Parkway, being developed by Standard Life Investments in Newbury, Berkshire, 50 miles (80 km) from London, which will open in October. The 950,000-square-foot (88,300-sq-m) residential and retail scheme includes 295,000 square feet (27,000 sq m) of gross leasable area serving a catchment area in which 33 percent of households earn more than £50,000 ($79,000) per year. The project will be anchored by retailer Marks and Spencer, a large H&M clothing store, and a Debenhams department store. The first phase of the 184-residential units will go on site this year.
But the first new shopping center to open since the recession brought work to a standstill will be in West Yorkshire. The 550,000-square-foot (51,000-sq-m) Trinity Walk scheme in Wakefield is to open this April, anchored by a 100,000-square-foot (9,300-sq-m) Debenhams and a 173,000-square-foot (16,000-sq-m) Sainsbury’s grocery store.
The first major retail development to go back on site that was not partly built before the financial crisis is Land Securities’ Trinity scheme in the center of Leeds, which will add 1 million square feet (93,000 sq m) of new prime retail space and will be anchored by extensions of existing Marks and Spencer and Boots stores that will wrap around the parcel. Land Securities marketing executive Claire Reynolds said the firm is aiming for a BREEAM Excellent rating for Trinity, which would make it the first purely retail scheme in the U.K. to achieve this. The project is to open in 2013.
Some retail-led mixed-use or regeneration schemes may be made viable by the new government’s go-ahead, announced in October, for a U.K. form of tax increment financing (TIF).
The coalition government favors a variant of TIF in which public bodies borrow money against future tax incomes to make regeneration schemes more viable. However, several people at the BCSC conference in Manchester said they think many stalled retail schemes would be more likely to be unlocked by private sector–led borrowing within the TIF structure, which has become common in the United States as a tool for bringing forward commercially viable sites for development.
Prominent among those major proposals thought likely to be made viable by the use of TIF is the redevelopment of the Nine Elms area of London, which includes the iconic Battersea Power Station. Developer Treasury Holdings has pledged £200 million ($315 million) toward the cost of extending the Northern Line of the subway to the site, and it is expected that the local councils will be able to use TIF to fund the remainder. Wandsworth Council gave planning approval in November to the £4.5 billion ($7.1 billion) project, which includes 3,800 homes, 1.5 million square feet (140,000 sq m) of retail and leisure space, and 1.7 million square feet (158,000 sq m) of office space.