Nov 12, 2019
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Landsec profit dips in tough market, but flagship malls outperform

Nov 12, 2019

It’s always interesting to see how the owners of UK shopping centres are faring, especially in an environment in which footfall to such centres is dropping and many stores are exiting leases on the back of company voluntary arrangements. 

Landsec's shopping destinations like Bluewater are outperforming in a weak market - Landsec

On Tuesday, major landlord Landsec reported results for the six month to the end of September and said it had “a good first half, delivering resilient results in unsettled market conditions”.

The owner of Bluewater, Cardinal place and a raft of retail parks across the UK was helped by “strong operational metrics and increased development activity in London,” although he latter was all about offices rather than retail, according to CEO Robert Noel.

That said, the results were hardly a triumph. The company’s revenue rose just 0.4% to £225 million, but the loss before tax was £147 million, compare to a profit of £42 million a year earlier. The company also said it had a combined portfolio valued at £13.4 billion, with a valuation deficit of £368 million, or 2.8%. 

Looking specifically at its retail properties, like-for-like net rental income was down by £2 million, or 1.5%, compared to a rise of £4 million, or 1.4%, for its total portfolio. 

Yet its retail destinations are “significantly outperforming national benchmarks for footfall and sales,” with footfall down 1.8% against 4.2% for the market as a whole, and like-for-like sales at shopping centres down 0.7% compared to a 3.8% deficit for the entire market.

The CEO said that “the retail market continues to be challenged as retailers adapt to structural change, rising costs and a more cautious consumer, with a number of high-profile company voluntary arrangements (CVAs) and administrations during the period. Limited demand for space and poor investor sentiment is impacting rental and capital values”.

He expects the retail market to “remain challenging as it continues to be impacted by structural change, CVAs and administrations”. 

But he said “outlets will continue to be among the best performers in this sector and dominant retail destinations will attract a greater share of retailer demand. We'll continue to develop plans for repurposing assets where we see opportunity to create value”.

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