Big losses for landlords are raising questions about the future of the retail property industry and the changing relationship between landlords and their retail tenants.
With valuations slashed, profits turned into dire losses and once-safe tenants appearing increasingly risky, the UK’s retail landlords are suffering from arguably the worst conditions on the high street in a generation.
Three of the largest landlords – Landsec, British Land and Intu – have been hit by a surge in company voluntary arrangements (CVAs) over the past 12 months, and retail performance has dragged down other more buoyant parts of their portfolio.
Retailers are now finding themselves with the upper hand in negotiations for the first time in years, as landlords seek to fill space. But experts warn that without landlord investment, urban regeneration could cease. Drapers talks to retailers, landlords and agents about the seismic shift in relationships.
Losses at Bluewater owner Landsec trebled to £123m for the year to 31 March. It blamed margin pressure and weakening consumer demand.
Meanwhile, Intu – owner of the Lakeside, Metrocentre and Merry Hill shopping centres, among others – that it was braced for a “challenging year” and net rental income was expected to slide by 4%-6% as a result of margin pressures, weak demand and consumers’ shift to online shopping.
British Land slashed the value of its retail portfolio by 11.1% for the year to 31 March. CVAs alone cost the landlord £14m in lost revenue for the year.
British Land is owner of London’s Broadgate and the Meadowhall shopping centre in Sheffield. Its figures show that, of around 2,000 stores in its portfolio, 132 had been exposed to CVAs and administrations since 1 April 2017, leading to rent reductions of £16.9m. It anticipated that CVA action would reach its peak in the first quarter of the 2019/20 financial year.
Many property experts say the results are the poorest since the financial crisis of 2008, and there may be worse to come for landlords.
One property source believes landlords are…….
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