Cadogan Estates hit hard as retail property values plummeted
Cadogan Estates, the family-owned company that owns swathes of commercial and private properties across London’s Chelsea and Knightsbridge, saw the value of its 93-acre portfolio hit by almost £800 million during the pandemic year.
Declining values of its stores and homes meant the valuation of its overall portfolio plunged 14.2% to £4.8 billion. Retail property valuations alone fell by over a quarter to £2.1bn.
However, chief executive Hugh Seaborn told The Times that the recovery from lockdowns was "progressing more quickly than expected”.
He said: “We’ve recovered fast and well… people are out shopping and there’s a lot more positivity around”.
He noted visitor numbers have recovered to 80% of their pre-pandemic levels, adding that there had been “surprising levels of interest in shops from retail brands”.
Vacancy levels were “negligible" as the estate supported tenants and introduced pop-up stores to attract more visitors. Cadogan has offered its retail and leisure tenants more than £15 million of financial support during the pandemic. The company said that it expected losses from financial support and unpaid rents to total £21.4 million for the 2020 financial year.
Retail property accounts for about half of Cadogan’s rental income which fell by 13% to £143.3 million. A third of its income comes from residential and the remainder is offices.
Although Seaborn admitted that retail values have fallen by about a third over the past two years, he added: “I now expect that to stabilise”.
He said he was confident that valuations for stores on the estate were reaching the bottom, pointing to renewed interest in storefronts on the Kings Road and Sloane Street. “We know that retailers require fewer shops, but they still require bricks and mortar stores to convey their brand”, he also told The Financial Times.
Importantly, the estate has held up better than some other London shopping districts during a period of decline in international travellers. About 80% of sales in the area are to domestic shoppers.
However, the company remains concerned about the government’s decision last year to abolish a scheme that allowed visitors from outside the European Union to reclaim 20% VAT on goods bought here.
“This leaves the UK as the only European country not to offer tax-free shopping and will inevitably result in some visitor spending going elsewhere,” Cadogan said. “This is an additional unwelcome challenge for retail and it will take time, once international travel returns, to understand the impact of this”.
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