Edinburgh Retail Market Review

3rd March 2016

Edinburgh city centre continues to attract retail and commercial investment, despite wider challenges facing the market. These challenges include online competition, and a very slow recovery in retailer demand which is yet to reflect improving consumer expenditure. Real wages are rising and retail sales in Scotland grew by 1% during the third quarter of 2015, and by 4% on an annual basis.

The city centre’s largest investment in a generation, Edinburgh St James, is underway. TH Real Estate’s £850 million redevelopment of the St James Centre secured planning consent during Summer 2015. Site enabling works began in January 2016 and closure of the existing centre to allow demolition is scheduled for Spring 2016. Anchor tenant John Lewis Partnership will continue to trade throughout the redevelopment. The developer anticipates that the new centre comprising more than 93,000 sq.m. of shopping, leisure, hotel and residential accommodation will extend Edinburgh’s shopper catchment by 20% and promote the city’s retail sector from its current UK rank of 13th, to 8th place. Some existing occupiers of the St James Centre are anticipated to open in alternative city centre locations, potentially with tenant-only lease break options for those larger retailers which are planning to relocate back into the new centre in improved accommodation.

Market activity in 2015 and moving into 2016 is focused on the core New Town retail grid between George Street and Princes Street.

Jewellers Laing has just relocated its flagship store from Frederick Street to the former Barclays unit at 72 George Street. Re-investment in Frederick  Street includes kitchenware retailer Le Crueset (at number 34), opticians Vision Express (number 24), chocolatier Thorntons (numbers 9-11) and clothing and accessories outlet Pretty Green (relocating from Hanover Street to 22 Frederick Street).

Lululemon athletica opened a sportswear store at 57 George Street and clothing retailer Jaeger opened at number 35 in the former East unit (East having relocated to number 85).

On Princes Street, shoe retailer Skechers opened in number 79 and Card Factory took 119a (the former Phones 4 U shop).

A new retail format came to Edinburgh in December 2015, when Tesla Motors opened a showroom for its premium electric motor cars on Multrees Walk.

Nearby on St Andrews Square, Standard Life Investments and Peveril Securities’ development is well underway and will include a TK Maxx store and six restaurants, of which New York contemporary steakhouse STK Rebel, barbecue lobster shack Big Easy and Bombay style café Dishoom will be opening their first restaurants outside of London.

Princes Mall’s rebranding as Waverley Mall also has a food and drink flavour, including Greggs, Chopstix Noodle Bar, Sushi Stop, and a Post Office to replace the St James Centre branch.

Diversification in this way to include non-retail uses continues to be a major market theme. Around half of demand for retail locations is coming from leisure operators, including bars, restaurants – particularly casual dining chains – and cafes. The line between retail and leisure continues to blur as asset managers seek to draw more customers, widen the expenditure base and increase dwell time in their malls and city centres.

Hotels, cinemas and health & fitness are also actively investing in city centres, including plans by Travelodge to create hotels within UK shopping malls. Premier Inn’s hotels on East Market Street and York Place are due to open during 2016, as are its Hub concepts at East Market Street and Rose Street. The Adagio Aparthotel on Canongate and Courtyard by Marriott at Baxters Place are planned for 2017. The Haymarket will include a Staycity aparthotel and a Premier Inn hotel.

The indicators in the table highlight Edinburgh’s retail performance since 2010. Edinburgh has ranked between 12th and 15th in the UK based upon retail turnover. The city centre vacancy rate has gradually declined over the past 5 years. Prime rents remain broadly stable, although this masks significant growth in George Street while Princes Street has remained broadly static. The retail rental trend at a portfolio level is now recovering.

The city centre is complemented by - and in competition with - a substantial out-of-town retail offer. Some retailers are operating multi- store strategies in Edinburgh and investing both in and out-of-town, most notably at Fort Kinnaird which welcomed several retailers during 2015. Primark opened a new store in the former Toys R Us unit (the latter has relocated within the retail park), while TK Maxx and HomeSense opened a combined shop. All new units in the £13 million leisure extension, which opened in spring 2015, were pre-let and include outlets for PizzaExpress, Nando’s, Frankie & Benny’s, Chiquito, TGI Friday’s and a seven-screen Odeon cinema. Out-of-town retail parks are increasingly important to retailers seeking to grow their online click-and-collect sales.

Recent property investment transactions continue to place Edinburgh at the top prime end of the market. Initial yields of 4.45% for 131-133 Princes Street (price £8.45 million) occupied by Halifax and 4.75% for Debenhams department store at 109-112 Princes Street (price £25.2 million) confirm investor confidence in the city centre market and its future growth potential.

Categories Blog Research Retail

Mark Robertson

Mark is Edinburgh Regional Managing Partner and provides an external consultancy service to clients and internal advice to Ryden. He is the leading research authority on Scotland's property markets and has completed more than three hundred property consultancy projects for public and private sector clients over the past 24 years.

Mark's experience includes property market research, economic and market analysis, options appraisals and funding studies. He is editor of the authoritative Scottish Property Review.

External Tutor, Property Investment Appraisal (MSc), Napier University

Investment Property Forum 

FRICS and contribution to RICS Scotland policy forums

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