Edinburgh Market Update - Summer 2018

Edinburgh stands firm despite what has been a turbulent start to the year. 2018 has seen a rise in the prominence of Company Voluntary Agreements (CVAs) in the retail and restaurant sectors. The impact of rising business rates, rising costs following Brexit and increasing wages are forcing some occupiers to the point of insolvency. As a result, several high profile retailers and restaurateurs have had little option but to enter into a CVA; including New Look, Maplin, Mothercare, Toys R us, The Orginal Factory Shop, Jamie’s Italian, Byron Burger, Carluccio, Prezzo, and one of the most recent cases, House of Fraser. Recently however, House of Fraser have negotiated a conditional extension to a £125million term loan and £100 million revolving credit. The conditions to extend the loan are, that it will only be granted if landlords approve the CVA plans, which will involve 31 store closures and rent cuts on an additional 10 stores. 

Despite this rather gloomy outlook across the UK, Edinburgh has continued to show resilience and promise, largely due to tourism and its status as the most visited city in the UK outside of London. The popularity of Edinburgh as a tourist destination has led to Edinburgh Airport now being the fastest growing airport in Europe with passenger numbers reaching 13 million and projected to grow to 26 million by 2040. In June, Edinburgh Airport commenced direct flights to Beijing which will further increase Edinburgh’s tourist spend.

The strength of the Edinburgh retail market is perhaps highlighted best by the fact that there have been no retail or restaurant closures in the city centre as a result of these recent CVAs. While it has been publicised that House of Fraser intend to close their west end of Princes Street store as part of their CVA, this will present an excellent opportunity for Edinburgh-based property developer Parabola, who recently purchased the building, to develop the property for an alternative use on the upper floors whilst retaining an active Princes Street frontage.

At present there is limited availability on Princes Street, with much of the supply being taken up by retailers relocating from the old St James Shopping Centre. This has resulted in some rental growth in the prime pitch with Zone A rates of £255 per sq ft being achieved. The former BHS store, although vacant, is in the process of being redeveloped by the owner LaSalle, which will involve retaining a retail store on Princes Street whilst developing the upper floors and rear building on Rose Street; which has been pre-let to Premier Inn. On Rose Street, in the block between Frederick Street and Castle Street, there has been quite a bit of activity with Fly London and Headcase Barbers taking space and establishing the rental tone at £60 per sq ft Zone A. The Landlord Hazledene own a large part of the street and are actively managing the tenant mix to attract niche retailers who will collectively create a stronger retail destination in the city.

George Street remains attractive to a number of new brands seeking representation in the city. These include Cos, & Other Stories, Arket and Boden, all of which would be great names for Edinburgh. However the lack of suitable available retail space is preventing them securing stores which is frustrating for the city. Despite this, there have been several new lettings on George Street including Lyle & Scott, Le Labo, Finisterre, Fazenda, Optical Express and Victor Hugo. The current tone on George Street is £200 per sq ft Zone A.

Edinburgh St James is the largest city centre development Edinburgh has seen for decades. The construction of the 1.7 million sq ft mixed use development by TH Real Estate is well underway, with the steel work now heading skywards. There is absolutely no doubt that this will put Edinburgh firmly on the retail map, moving it from 13th to 8th in the CACI UK retail rankings. Comprising 850,000 sq ft of retail and leisure in a stunning environment, anchored by John Lewis Partnership and Everyman Cinema, the development will satisfy much of the city’s pent-up demand whilst attracting many new occupiers to the city. Opening in 2020, the projected footfall is 20 million. The centrepiece of the development is the iconic 5 star W Hotel designed by Jestico and Whyles, which will house a roof top bar and restaurant with 360 degree balcony and roof terrace, offering unrivalled views across the city. Undoubtedly this will become the “must see’ for any tourist to the city.

Multrees Walk anchored by Harvey Nichols has seen its footfall decline following the closure of the old St James, however it is now firmly established as the luxury and high-end retail pitch in Edinburgh. Despite this difficult trading period it is still attracting interest from several luxury retailers including Hermes, Max Mara and Johnston’s of Elgin. When Edinburgh St James opens, Multrees Walk will benefit from significant footfall and provide a key link across St Andrew Square to the retail offering on George Street.

The impressive St Andrew Square transformation is now nearly complete. It is one of the most stunning public spaces in the city surrounded by a strong mix of old and new architecture. Aberdeen Standard and Peveril Securities’ building on the south side of the Square has been the catalyst for much of this change, by establishing a new restaurant quarter with premium brands such as Dishoom, Gaucho and The Ivy.

Development company S Harrison is proposing to develop the Grade A listed Buchan House located on the north side of the Square into the latest boutique hotel for Malmaison Hotel du Vin Group. The work will transform it into a 72 bedroom Malmaison hotel complete with Chez Mal Bar and Brasserie.

Ennismore, owner of the luxury Gleneagles Hotel, have recently purchased the former Bank of Scotland on the east side of St Andrew Square and propose to develop it to create a bar and restaurant with roof top winter garden and a handful of bedrooms. This beautiful building will be brought to life by the Gleneagles brand and is expected to open towards the end of 2020. On the same side of the Square and to the south, Chris Stewart Group have partially completed their £85 million regeneration project of the former RBS buildings resulting in the recent opening of The Edinburgh Grand luxury serviced apartments and premium steak restaurant Hawksmoor who occupy the former RBS banking hall. Still to be completed is The Mint Building which will provide 65,000 sq ft of Grade A office accommodation that has been pre-let to Baillie Gifford. On the ground floor of this building Chris Stewart Group have recently signed Chinese restaurant Tattu who join pizza restaurant Franco Manca.

Edinburgh is now competing on a European stage with cities such as Barcelona, Copenhagen and Amsterdam. It has attracted substantial investment in prestigious development projects and is able to attract the best UK, European and International retail brands. With Edinburgh St James putting Edinburgh on the retail map we have every reason to be confident about the city’s future ability to attract visitors and investment.