Shopping centres prove resilient
SHOPPING centres in the West Midlands have proved themselves more resilient through recession than in many other parts of the UK, a new survey has revealed.
The study by the British Council of Shopping Centres (BCSC) – Secondary Centres – shows that second-string centres in towns around the region proved to be less at risk of defaulting on loans than in places like London, the South East and the North of England.
According to the study, which was undertaken by DTZ, one in every five shopping centres in the UK is at risk of defaulting on its loans, with an estimated £10.1bn worth of centres at risk. This equates to 43% of all shopping centre transactions in the last five years.
Factors contributing to the decline of secondary centres were said to be: a lack of investment; poor asset management; failure of a number of national retailers; and poor due diligence at the time of purchase.
Secondary centres are classed as those below the large city centre malls like the Bullring or the massive out-of-town sites like Merry Hill.
They are followed in the shopping hierarchy by suburban parades and the lower tier, corner shops.
Adam Lazenbury, retail director at DTZ, said: “Secondary shopping centres make up a large sector of the retail market and one that is affordable to a wide variety of owners ranging from property companies, wealthy individuals, investment companies, speculators and developers.”
He said sector had rather untypically demonstrated high levels of turnover prior to 2008 with some centres changing hands times within a few years.
However, in the current market secondary shopping centres had presented opportunities to well informed investors because of factors such as falling capital values, rising shop vacancies, tenant insolvencies and retailers re-negotiating lease terms.
“In the West Midlands fewer than 10% of shopping centres are deemed at risk, reducing to 5% in the East Midlands. Therefore by comparison to London and SE with 24% and the North 35%, the resilience of the Midland market can clearly be seen,” said Mr Lazenbury.
“Consequently when opportunities do arise, greater credence can be given to the longevity and success of the shopping centre.
“It is important for landlords of secondary shopping centres to understand the interaction of retailers within the local economy to ensure they are able to trade successfully. A proactive leasing and asset management stance will keep the scheme trading and therefore ensure the scheme’s and consequently the assets long term survival.”
The research also reveals the growing polarisation between the performance of prime and secondary retail property, which has been exacerbated by the economic downturn.
It concludes that in spite of recent growth in capital values, collaborative action is required by all stakeholders to prevent secondary centres from falling into further decline.
BCSC’s Secondary Centres Taskforce – a group of cross-sector partners from the property, retail and banking sectors – commissioned the research to investigate the extent of the problems facing secondary and tertiary centres, the approaches being adopted to manage these assets and the action needed to facilitate their improved performance.
This included face-to-face interviews with a number of banks, property companies, appointed administrators and retailers.
