Shopping and leisure development in Scotland has been held back since September 2014 and faces a renewed threat to growth from Brexit turmoil and the prospect of a second referendum, property analysts have warned.
The annual midsummer report on the retail sector by Colliers International says that with Scottish economic growth “set to underperform for the rest of 2016 and beyond, Scottish retail will need to take decisive action to raise its game”.
James Watson, head of retail capital markets at Colliers, said: “Investor perceptions are for more economic uncertainty and Scotland is going to be in no-man’s-land more than others because we have got two layers of complexity for investors to deal with...it will lead to more of the current malaise.”
Developer David Young commented: “We have been struggling in Scotland for quite a few years and were on the slow road to recovery, this is certainly not going to help.”
Mr Watson told an investor audience in Edinburgh: “Prior to Friday we already had uncertainty – (UK) retail investment transactions were down 40 per cent year on year as investors awaited the outcome of the vote.”
He said UK-wide the expectation had been that next year would see the highest amount of new shopping centre space since 2008, but added: “In town centres a lot of developments won’t happen.”
Some sites needed to be adapted to out of town formats with bigger units and parking, he said, which would be “good for regeneration”.
Jess Ford, researcher at Colliers, said the collapse of Austin Reed followed by BHS showed the danger for retailers who could not adapt to the new multi-channel norm. “The Living Wage and Amazon Fresh will not alleviate the pressure on supermarkets, though retailers’ fortunes are generally improving albeit at a modest pace.” She said the risks to growth were the depreciation of sterling leading to higher import costs, inflation and potentially higher interest rates causing consumers to rein in spending.
The report found persistently vacant shop units up from 15 to 24 per cent and those empty more than two years up from 21 to 23 per cent.
In Scotland, nine of the 27 shopping centres saw deteriorating rents last year with the worst performers “caught in the gravitational pull of Glasgow” including Ayr, Cumbernauld, Greenock, Hamilton and Irvine.
But Ross Wilkie, Colliers retail director in Scotland, said there were plenty of signs that alongside the importance of social media and the internet “we see the importance of bricks and mortar returning”. He said flagship projects were progressing in the major cities and the new City Deals for Aberdeen, Edinburgh and Glasgow would “act as a catalyst for additional funding from the private sector”.
Mark Phillipson, head of Colliers’ retail division, said BHS had been “a bitter pill for many” but it brought the opportunity for renewal with modern brands. He said: “We are facing the challenge of sweeping away a great deal of the past in terms of dysfunctional town centres. Local authorities must play a growing part in grasping the nettle and exerting the coordinated control that can bring change.” Some of the business rate burden “must be redirected into breathing new life into our towns and cities”, Mr Phillipson said.
Peter Muir, head of rating in Scotland, said the Scottish Government’s consultation on the business rating system ended six months ago and the outcome was now “long overdue”, with many businesses paying inflated 2008 prices for eight years.
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