Pressure is being applied to new retail stock at a time when desire for new physical space is peaking and construction starts reached a 20-year low.

Data shared exclusively with Retail Week by property analytics firm CoStar shows that ground was broken on just 500,000 sq ft of new retail space in the final three months of 2023 – down 53% year on year and less than a quarter of the long-term average of 2.4 million sq ft.

The data found this was the weakest quarter for new construction in more than 20 years, as rising interest rates, inflation and construction costs compounded already-weak sentiment towards the retail sector generally.

It is a continuation of a downward trend in new retail space construction over the past two years and the amount of space now stands at a national record low of 5.6 million sq ft at the end of 2022.

This is down from a peak of nearly 18 million sq ft underway during the financial crisis in 2009.

The pandemic itself caused huge delays, cancellations and amendments to many retail projects in the UK, while the trend for converting former shopping centres and department stores away from retail to other uses has gathered pace.

As a result, net retail deliveries of space also plunged to their lowest level in more than 20 years in 2022.

CoStar senior director of market analytics Mark Stansfield discussed the reasons why we are seeing the trend: “The pandemic caused the delay, cancellation or amendment of many retail projects across the UK, with development only weakening further since all restrictions were lifted more than a year ago.

“The trend of converting shopping centres and department stores into other uses is gathering pace too. Net retail deliveries plunged to their lowest level in more than 20 years in 2022. Little new space is likely to be added on a net basis in the coming years too.”

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