Consumers are out there, insists Land Securities

It's as if the recession never happened. In the centre of Leeds, under a round roof, a 92,000 sq metre shopping centre is emerging. Trinity Leeds, which will feature a giant Primark, is expected to catapult the city into the UK's top four retail destinations, alongside London, Glasgow and Birmingham, when it opens in the spring of 2013.

That's assuming consumers will keep shopping. Amid gloomy predictions of an age of austerity lasting for decades, and as the popularity of online shopping continues to grow, Britain's high streets are struggling for survival. A swath of retailers, most recently Habitat, Jane Norman and Focus DIY, have shut up shop. But this is not stopping Land Securities, Britain's biggest property developer, from stepping up investment in retail parks and shopping centres.

Francis Salway, chief executive, is adamant that this is not a speculative punt. "We're responding to growing demand from food and fashion retailers. Retailers are planning two to three years out; the stronger retailers got their balance sheets into good shape. We wouldn't be doing these developments on a wholly speculative basis," he said.

"We are alive to the challenges in the retail sector but the important thing is we're doing business with the retailers who are taking more space, and our portfolio tends to be in the stronger locations." The company's One New Change shopping centre in the City of London, which opened last autumn, was trading "soundly", he said.

Uncertain

Trinity Leeds is not the company's only new project. It is also building a scheme in Buchanan Street in the heart of Glasgow, an extension of its shopping centre which is directly opposite. The new development is 68.7% let, with Forever21, Gap and Paperchase among the retailers signed up. In addition, Land Securities announced on Tuesday that it was putting a further £275m into seven smaller malls and retail parks, totalling another 93,000 sq metres of shop space, in Wandsworth, south London; Derby, Taplow in Buckinghamshire, Crawley in West Sussex and Thanet in Kent, plus two others.

Steve McGuckin, UK managing director at the construction consultancy Turner & Townsend, and a former Land Securities director, said: "As long as consumer confidence stays at such an uncertain level, there will be question marks over retailers' ability to keep paying their rent. Looking forward, we're unlikely to see rapid growth for either commercial or residential developers. It will be more of a case of steady as she goes than full steam ahead."

Britain's high streets are increasingly populated by charity and pound shops as many mainstream stores shut down or decamp to edge-of-town shopping centres. The big supermarket chains – Tesco, Sainsbury's, Asda and Morrisons – are involved in a "race for space", along with fashion retailers including Primark, SuperGroup, H&M, Next and Marks & Spencer.

"The world is changing," said Nick Bubb, Arden Partners retail analyst. "It's all about big schemes, bigger centres and online [shopping]."

Off the map

Trevor Wood, of the retail consultancy Trevor Wood Associates, added: "Tertiary [poor-quality] space could fall off the map. Retail stock [shops] in provincial areas of Glasgow, for example, may not do so well."

Salway highlighted the gap between the average shop vacancy rate of 14% on UK high streets and the 4% rate at Land Securities' shopping centres. "The high street is at a disadvantage – it's not able to create these large units," he said. But he held up the redevelopment of the derelict Buchanan Street site in Glasgow as a model for a high street revival. "If people were able to assemble large chunks and were free to develop them, we could see the high street strengthen," he said.

Other developers are also investing in good-quality shop space, with Hammerson planning to build a 130-unit (100,000 sq metre) centre at Eastgate Quarters in Leeds. British Land has snapped up a string of shopping centres in recent months – in Barnstaple, Devon; Basildon in Essex, and Plymouth's Drake Circus centre – and retail makes up two-thirds of its portfolio.

Revival

Analysts sounded a cautious note over the timing of the Land Securities developments but suggested that fortune could favour those who trusted in a consumer revival.

Brian Johnson, an insolvency partner at HW Fisher & Company chartered accountants, said: "You would need to be extremely brave to consider investing in high street retail space at the moment. Investing in retail is a bet on the consumer but does the consumer really look like a great bet? Over the next few months, there's every chance we will see even more major retailers collapse, bringing further despair.

"However, this downturn can't last for ever. In the next six months to a year, it could be that the high street starts to come back to life, and those who jumped in at the right time will make the most of this recovery. Naturally, certain towns and cities will fare better, or be more resilient than others, but the overall picture remains extremely challenging."

Anna Smee, director of business strategy at Hundred Consulting, said: "It is incorrect to talk of the death of the high street - we should talk rather of its evolution. The high street has undergone a huge transformation in recent years, which is a result not just of the recession but the growing momentum of online shopping. We are seeing a shift back to specialist, often owner-managed retailers that offer a high level of personal service or an unusual mix of products that are not available in the big retail outlets on the outskirts of the UK's towns and cities."