UK shopping centre values could drop 28%

UK shopping centre values could fall by a further 28% by 2021 is the stark warning from one analyst in the sector.

Following the publication of Intu’s results this week property analyst Colm Lauder of Dublin-based stockbroker Goodbody said that anticipation of sharp writedowns in UK shopping centre values gathered pace in December when the RICS issued an unusual guidance note warning of ‘potential for significant changes in value’ for UK retail properties.

He commented that Intu’s value declines were ‘significant’ at -13.3% for 2018.

‘But in our view, this is only the start,’ Lauder remarked. ‘A realistic writedown move has continued to be stymied by a lack of transactional evidence. Our analysis shows UK shopping centre values falling by a further 28% to 2021, though prime centres hold up better with declines of 15%.’

Lauder said the key focus of the Intu results was on valuation treatment ‘following the embattled performance of UK retail following a perfect storm of challenges, Brexit and changing consumer patterns’.

Intu’s capital value was down 13.3%, NAV was down 99p to 312p and the final dividend was suspended to retain cash to help control LTV. Intu also said it had received a number of unsolicited offers for its Spanish assets (total £628 mln (€723 mln).

Lauder said that from an operational perspective, Intu’s performance was relatively robust with like-for-like rental income up 0.6% following new lettings and rent reviews. But tenant failures pulled income down by -1.9%, he added.

‘Intu have put a brave step forward in their FY18 results with sharp value declines acknowledging the challenges faced by UK retail. However, we consider the 13% declines evident in FY18 are only the start of a further downward trend.’


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