Boost for retail sector

The raising of £200 million to fund new shopping centre developments and acquisitions by a group backed by veteran financial investor Neil Woodford is a fillip for the retail sector, which has been suffering from a slump in starts. NewRiver has funds for a £30 million development pipeline, which is a rare bright spot in a sector hit by changing shopping trends that have curtailed major developments at the big supermarkets. Development sites have been sold off as shoppers move online and Budgens’ decision to close 34 stores did little to engender confidence. Glenigan economics director Alan Wilen says: “New build projects will remain in short supply during 2017. “The current problems and retrenchment faced by the top four supermarkets, until recently a major source of retail construction activity, is testament to a shifting pattern of consumer demand. The top four supermarket chains have scaled back their investment programmes, redirecting funding towards the convenience store market, which more often entails conversion of existing high street premises with Sainsbury’s moving into franchising. “Other high street retailers are also focusing on store re-modelling, driven by high levels of competition and efforts to accommodate click and collect services.” The shift in the retail construction sector is evident in Glenigan’s ranking of the industry’s top 100 clients, which contains just two grocery chains – the budget retailers, Aldi and Lidl. In the ranking of clients by work awarded in the 12 months to Q1 2017, Lidl is the highest ranked retailer after letting 108 projects valued at £250,000 or more. The total value of these projects was £323.7 million and Lidl was ranked 12th in Glenigan’s top 100. Aldi was the next highest in 40th position after awarding £169-million-worth of main contracts. J Sainsbury was the next biggest-spending retailer after awarding £73.2 million-worth of work but did not feature in the top 100. Neither did Marks & Spencer, where the contract awards totalled £61.1 million at Q1 2017, nor Asda (£50.4 million), John Lewis (£48.4 million), Tesco (£43.1 million) or Wm Morrison (£21.4 million). Some developers that work closely with leading retailers are progressing with development plans. Roxhill awarded £169 million-worth of work at Q1 2017 and ranked 49th in Glenigan’s ranking, but the onus amongst leading retailers is on smaller projects. The average Lidl project going to main contract award at Q1 2017 was valued at £3.0 million, with the average Aldi award lower still at £2.25 million and this measure for J Sainsbury was £2.15 million and just £1.52 million at Marks & Spencer and £1.57 million at Asda. The retailer with the lowest average spend was at Wm Morrison with the average contract let valued at £1.02 million. The retailer progressing with the biggest stores was Tesco, where the average contract let in the 12 months to Q1 2017 was valued at £3.59 million followed by John Lewis at £3.22 million. These changes to the sector are produced big swings in the underlying value of projects starting on site and Glenigan forecasts a fall in retail starts this year followed by an even larger drop next year.