Retail expansion set to boost incomes for shopping centre owner

Two major retail expansions as the Merry Hill shopping centre during 2018 are expected to provide a major income boost to site owner, intu.

In total, intu is planning to invest around £100m in the site, of which £70m will be spent in the period up to 2020. The investment is an attempt to bring the centre into line with other intu sites, such as Lakeside.

It is hoping that expansions by Primark and Next will not only improve rental income but help increase footfall at the centre.

Rentals took a dip in 2016 with the collapse of BHS and the withdrawal from the centre of supermarket group Sainsbury’s.

The decision left two major units unoccupied, with the subsequent loss of income.

However, East Midlands-based Next has agreed to take possession of the former supermarket unit – and an adjoining Burger King outlet – and the refitted unit is expected to open later this year.

intu has also agreed terms with Primark to expand into the former BHS unit, in a move that represents a 70% expansion of an already large unit at the mall (see below).

Once the multi-million-pound transformation is complete then the retailer will occupy 60,000 sq ft in total, making it one of the largest tenants at the centre.

The move follows expansion by the likes of River Island, Topshop and Topman, and JD Sports.

Nick Round, regional managing director at intu, said: “An increasing number of retailers are investing in new space at intu Merry Hill, reflecting the genuine confidence in the destination as a place where brands can really flourish.

“We’re looking forward to attracting even more great brands and creating compelling experiences for customers across the Midlands as our plans for intu Merry Hill progress.”

Merry Hill, which covers 1.7 million sq ft, generates an annual property income of £42.4m from 217 stores. It attracts around 21 million visitors a year yet it retains its position as having the lowest percentage of ABC1 customers – 48% – of any of intu’s large centres.

In its annual results, intu revealed its 2017 investment programme stood at £184m, while the pipeline for the next three years amounts to £562m, with plenty of opportunity beyond that date.

It has targeted Nottingham as one of the sites for expansion, while it also has a mall in Derby.

In its results statement, the property company said growth had been offset by the 1.4% impact of units closed for redevelopment and/or repositioning. These were mainly former BHS stores, although the company said these were now substantially relet.

“These were not income producing in 2017, but will come back on stream in 2018,” it said.

Overall, rental income showed a small increase at £460m (2016: £447m), while underlying earnings were flat at £201m (2016: £200m). The revaluation of the portfolio saw a deficit of £64m in 2016 overturned into a £47m surplus.

IFRS profit for the year increased to £203m (2016: £172m).

How the expanded Primark store will look

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