Property giants suffer £2.7bn write-down after retail values plunge
Britain’s biggest landlords suffered a £2.7bn write-down in the value of their investment properties in the last 12 months, as a sharp downturn in the retail sector sent shockwaves throughout the property industry.
Real estate giants including Intu, British Land and Land Securities nursed significant losses in the overall value of their assets last year as an increasing number of their retail tenants succumbed to tough trading conditions and closed their stores.
Read more: Retail property value set to plunge
According to new research from Growthdeck, the top UK property firms and real estate investment trusts (Reit) made £2.7bn in write-downs on the value of their investment properties over the last year, marking a steep rise from £232m in the previous year.
The research underlines the current challenges for high street and shopping centre landlords, which have seen many of their retail tenants seek controversial rent cuts or close their shops as a result of rising costs and increased competition from online rivals.
In May both British Land and Land Securities posted losses as a result of a downturn in their retail portfolios, following a string of closures from some of Britain’s best-known high street brands.
A number of retail giants, including Debenhams and Sir Philip Green’s Arcadia fashion empire, have also triggered controversial company voluntary arrangements (CVA) in the last 12 months, in an attempt to reduce the rent bills owed to landlords.
Last week Colliers International showed that 11 cent of retail space on the UK’s high street is currently vacant, and that 33 per cent of that space has been empty for two or more years.
Read more: British Land swings to a loss as retail troubles hit property
Dan Simms, co-head of retail at Colliers International, said: “It may be controversial, but we need to be realistic – this is not sustainable, for landlords and local communities alike. Space that has been empty for a period of time that is this prolonged will never, in all likelihood, have a retail use again.
“Taking this into consideration and looking hard at the current state of the UK’s retail landscape, we believe that this trend will continue. The dilemma is how to reverse its crippling effects and ensure this space doesn’t stay vacant. The ‘obsolete core’ must be tackled.
“What’s encouraging is that the retail property market is already well underway in its response to this and there are repurposing projects taking place across the UK to help reduce, convert and, in some cases, remove this empty space entirely.”