Spending during the first half of 2006 was considered to be weak, but steadily improved into 2007, with sales volume growth having remained fairly constant over the last six months at 3-5%. However, this upturn in sales is the weakest since the mid 1990’s. Concerns remain as to the combined debt owed by UK families, and as such, consumer and retailer expenditure is not expected to improve significantly. Although inflation should moderate, interest rates are likely to remain close to present levels for 2007 into 2008 reducing household consumption. Retailers are therefore continuing to struggle in this challenging market.
Pressure on price deflation has a knock-on effect on rental performance. In Kent rental growth remains slow at only circa 1.4%. High street shops in most of the towns have seen little change in demand or, subsequently, in rental growth this year, with incentives required in order to attract new tenants especially in secondary locations. That said, other locations such as Tunbridge Wells have experienced some rental growth.
Nevertheless, plans continue for further investment within the Kent retail market. ING Retail Property Fund Britannica has forged ahead with the extension of the County Square shopping centre in Ashford, with Debenhams due to fit out its new store this autumn. Next, The Body Shop and H&M have also signed up to the development. Bouverie Place shopping centre in Folkestone is also well under construction, with Asda confirmed as the anchor store. Land Securities has also commenced the refurbishment of the Marlowe Arcade in Canterbury having sold its interest in the Whitefriars development for in excess of £240m.
In March, planning permission was granted to Bond City and Asda to build a 7,896.50m² (85,000ft²) store, with 3,251.50m² (35,000ft²) of retail and restaurant space within the St James area of Dover. Work is due to start in 2008. Also earlier in the year, Irish based investor BHL bought The Pentagon Shopping Centre in Chatham for around £93m, with intentions to refurbish it. Edinburgh House and Gravesend Borough Council signed an agreement this year to regenerate Gravesend town centre including a 8,361m² (90,000ft²) extension to the St Georges Centre.
|
Within the UK, retail warehousing has continued to perform better than high street retailing. That said, this market appears to have been affected by a quieter housing sector resulting in a fall in rental growth nationwide, although Kent’s performance is now more in line with the South East trend. Kent has witnessed an increase in rents over the five year term to 2006, with Canterbury, Tunbridge Wells and Maidstone reporting top rents of £258.34m² (£24ft²), £269m² (£25ft²) and £296m² (£27.50ft²) respectively. During 2007, rents have stalled, with reports suggesting that 2008 should see further rental value growth.
To some extent, this performance is due to tightly constrained supply, and as such, has attracted investment in the county during 2006 into 2007. Castlemore Securities has secured planning permission for a 14,303m² (153,968ft²) retail warehouse scheme to include non-food retail warehousing, a garden centre and a builder’s yard on the Medway City Estate at Rochester. The Thanet Retail Park, Broadstairs, developed by Keel Estates, was completed in September 2006 and is fully let. The Junction Retail Park at Aylesford has recently undergone refurbishment.
Retail warehouse yields within Kent closely follow the UK trend at sub 5%. The four year downward movement now appears to have stopped. If interest rates remain at current levels it is believed that yields are likely to remain relatively stable.
Significant Sales
Click to view table (this will launch in a new window)
Significant Lettings
Click to view table (this will launch in a new window)
Retail Rents
Click to view graph (this will launch in a new window)
Retail Rental Growth
Click to view graph (this will launch in a new window)
Retail Average Yields
Click to view graph (this will launch in a new window) |
