Garden Centres

After a slow start to the year and amid weak consumer confidence, spring has shown positive trends for sales within garden centres. The good weather has boosted demand, and, according to the Horticultural Trade Association (hta.org.uk), both the level of overall sales and average basket size showed positive increases year on year from April onwards.

Despite this, like all trading businesses, the garden centre sector continues to face challenges. With rising costs and fluctuating utility bills, operators have been prompted to act to secure long-term viability through development projects and engaging with the planning system. Initiatives such as renewable energy projects can provide much-needed cost reduction and energy security. What’s more, the National Planning Policy Framework (NPPF) proposes that significant weight is given to schemes that contribute to renewable energy generation and a net-zero future, presenting a big opportunity for renewable energy schemes.

Redeveloping to reinvest

As Savills has previously commented, garden centres typically have a low site coverage, often less than 14% and regularly less than 30%, which leaves scope for further redevelopment and sale or leasing of parcels of land not currently used by the business, to raise funds for reinvestment into the centre. However, sites are often located in the greenbelt and therefore any further development requires justification, with emphasis on employment benefits or lack of impact on the surrounding environment. Permission can be even more difficult to achieve if a complete alternative or additional use is sought for the site, such as housing.

The government’s planning policy reforms and introduction of the term ‘grey belt’ land last year were heralded by many as likely to change this, yet almost a year on, has anything really changed? Savills Planning commentators suggest that the window of opportunity may in any case be short-lived.

The NPPF defines grey belt as land in the green belt comprising previously developed land and any other parcels and/or areas that make a limited contribution to the aim of the green belt, excluding areas or assets of particular importance (i.e. land with an existing environmental designation).

There is opportunity for grey belt land to be suitable for development, as the NPPF makes clear that greenbelt development should be regarded as appropriate where:

• Development would use grey-belt land in sustainable locations
• LPAs cannot demonstrate a five-year housing supply, or the Housing Delivery Test indicates less than 75% delivery over the previous three years
• There is a demonstrable need for land to be released for a development of local, regional or national importance

As outlined in the NPPF ‘major developments’ are subject to the so called ‘golden rules.’:

• At least 50% is affordable housing, with an appropriate proportion of social rent, subject to viability
• Necessary improvements to local or national infrastructure are provided
• New or improved green spaces accessible to the public are provided

With Labour’s plans to build 1.5 million new homes, operators could consider selling off surplus land to housing developers for a short cashflow injection where the above applies.

Likewise, if garden centre operations become financially unviable and the business is forced to close, the above planning policy reforms may offer an alternative route for sale.

Having an underlying value for alternative use has been shown to bolster the confidence of investors in leisure and trading assets, and recent investment sales in the garden centre sector demonstrate this.

Overall, reforms to planning policy are an exciting opportunity for garden centre operators, but with more words in the press about the reforms than actions to date, it’s important to explore complementary proposals on sites at an early stage in this government’s tenure.