THE redevelopment of Princes Street will be halted for years because of the current state of the economy, it was claimed today.
Leading commercial property agents say that the city council's "string of pearls" framework for the redevelopment of the shopping thoroughfare will not become a reality because it does not make financial sense for firms to invest.
Interest in buyi
ng property on Princes Street has dried up as companies struggle to secure debt from banks to complete deals.
And the rising costs of development are also slowing down the entire construction market.
The average retail property in Edinburgh is predicted to have lost up to 20 per cent of its value in the last year.
Miller Mathieson, managing director of property firm CB Richard Ellis, said the council will find it difficult to find potential investors for its vision.
He said: "I understand why people want it to happen, I just struggle to see where the financial sense is.
"There is a lot of rhetoric about what people want to see on Princes Street, but given the range of ownership and the values I'm not sure anything can happen.
"In our world, the area hit hardest is development. The end value of what you build is down, the cost of borrowing for it is up and the cost of building it is up. In that climate, how can you encourage people to buy existing investments in order to make new ones?"
Earlier this year, city economic development leader Councillor Tom Buchanan told the Evening News that oil-rich sovereign funds in the Middle East had expressed interest in buying up large chunks of Princes Street.
But so far this year it is understood that only one small retail space has changed hands.
Alasdair Humphery, director of capital markets at Jones Lang LaSalle, said: "Traditional buyers such as UK pension funds are largely inactive at the present time and have a limited appetite for such investment.
"Other significant buyers such as Irish private investors tend to rely on debt to finance purchases of this size and this has been significantly curtailed.
"The important occupier market on Princes Street continues to be slow, although there are some glimmers of hope with the likes of Primark. I expect the availability of debt finance for purchases of any property on Princes Street will be limited for the next six months at least."
However, Irish property firm Deramore today confirmed it's in talks with the council over developing 121-123 Princes Street.
It is thought that the firm wants to turn the empty upper floors into a 100-bedroom hotel, while New Look is thought to be lined up for the retail space currently occupied by the shop Pride of Scotland.
A spokesman for Deramore said: "We are in consultation with relevant council departments prior to a submission of a planning application in August."
Jonathan Guthrie, director of City Centre Development Partnership, said: "The redevelopment of the city centre is a long-term project and confidence remains high that the string of pearls concept, to regenerate Princes Street in blocks, will come to fruition."
The full article contains 530 words and appears in Edinburgh Evening News newspaper.
