UK retail stock grows despite economic woes

This has all the trappings of the beginning of a children's fairy tale, albeit one that is more likely to have come from the stables of the Grimm brothers rather that Enid Blyton or Snow White; as there is a strange feeling in the retail sector at the moment.

Let me clarify. After a few weeks of various countries reporting second quarter losses and by default therefore officially labouring themselves with the word that no economist likes to hear, Japan the Far East's most progressive economy, finally joined the ranks.

Recent weeks have seen all but a few of the main European economies announcing negative quarterly growth, along with those of the US and of course the UK. However with all of this economic doom and gloom in mind, this is where this particular story begins to get interesting.

By the end of 2008, the UK will have seen 945,000 square metres of new retail space open, which will be the highest figure on record since 1965 - to give this a regional equivalent. This is akin to approximately three Dubai Malls. This figure includes 560,000 square metres of completely new retail space, with the remaining 385,000 square metres coming in the form of extensions and/or redevelopments.

However the UK isn't the only one, in addition to this Hungary, Albania, Poland and the Czech Republic are all seeing previously unseen levels of new retail stock being delivered to market in 2008/9.

Ultimately what this suggests is that certainly in the UK, the retail sector seems to have been a bit slow to capitalise on the availability of funding when the times were good and almost certainly wasn't as bullish as it could have been in delivering these products before the markets took a turn for the worse. However the problems will be compounded by the fact that the companies developing this new retail space, will face more serious long terms issues.

Current sales data from Europe suggests that with price playing a major factor in the consumers current purchasing decisions, it is the discount retailers and the lower price point out-of-town centres that are currently profiting in the economic slump. This doesn't bode well for these many new developments, most of which are centrally located, as part of city centre redevelopment plans. The outlook then certainly is grim and only time will tell as to the success and of course necessity of all of this new retail space.

- The writer is Head of Retail, GRMC Advisory Services.