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Commercial landlords warn demand is waning as businesses become more cautious

Carnaby Street is known for its elaborate Christmas lights - Getty Images Europe
Carnaby Street is known for its elaborate Christmas lights - Getty Images Europe

Two of the country’s largest commercial property landlords have warned that demand is dropping as businesses become more cautious about committing to new premises.

The Crown Estate has pulled out of a £75m project to extend a shopping centre in Exeter after failing to stoke enough demand for the new facilities.

The extension to the popular Princesshay shopping centre was first proposed in 2015, but The Crown Estate said that “market conditions” had meant it was no longer viable.

Plans for the site had included a new cinema, shops, restaurants and cafes, and The Crown Estate was working with TH Real Estate to develop the new buildings.

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But on Monday The Crown Estate said: "Unfortunately in the current market, many retailers and restaurateurs are now more cautious about making new commitments, particularly in proposed developments, which take time to build and therefore require a commitment several years ahead."

Meanwhile Shaftesbury, the landlord responsible for Carnaby Street, said on Monday that demand for larger buildings in London’s West End had flagged amid political and economic uncertainty.

The firm reported that while demand for smaller accommodation was good, its larger buildings required potential tenants “to commit to significant investment in fit-out and substantial rental commitments”, meaning that leasing activity had been more muted in recent months.

It said that although it was confident in its ability to secure tenants for some of its new developments, it was taking longer to complete the deals.

Shaftesbury is yet to find tenants for its large Thomas Neal’s Warehouse near Covent Garden almost a year after the building was finished.

A further scheme in Chinatown, which was completed in May, is also still being marketed.

Chinatown - Credit: Michael Kemp / Alamy
Shaftesbury also owns buildings in Chinatown Credit: Michael Kemp / Alamy

However, the company insisted that the capital’s West End is underpinned by an ongoing appeal to both Londoners and those visiting the city. Overseas tourists have flocked to the capital in part because of the fall in the value of sterling, which has made visiting the UK more attractive.

David Brockton, analyst at Liberum, said trading conditions were still “buoyant” despite Shaftesbury’s difficulty in finding occupiers for some space.

“While this has some negative inference for wider London letting conditions we believe it is, in part, a function of management’s deliberate selectiveness in seeking to select occupiers which fit with the Shaftesbury estate,” he said.

The firm has continued to expand its holdings in the city centre: since April it has acquired two restaurants for £9m, bringing its total purchases for the year to £37.1m. It has also signed a contract to purchase a building on Soho’s Berwick Street, which is being redeveloped into a supermarket, restaurant and a 110-bedroom hotel and will open next year.

Shares in Shaftesbury were flat on Monday at £10.12.