Shopping centre values have taken a tumble as the investment market struggles to come to terms with the credit crunch in the international financial markets. The sector's leading players have been forced to mark down their assets while investment market turnover has slowed almost to a halt.
Land Securities reported a valuation deficit of 2.1 per cent for its shops and shopping centres and 3.9 per cent on its retail warehouses over the six months to September 2007, which combined to wipe £123m off the value of its retail portfolio.
Chief executive Francis Salway warned: "We expect the current weak trend of property sales to continue, but we believe that the greatest impact will be experienced on secondary properties where, in recent years, yield pricing has not fully reflected the risks associated with lower quality properties."
And British Land saw similar markdowns. Chief executive Stephen Hester said shopping centre yields had moved out by 24 basis points over the six months to September. BL's retail portfolio was valued at £6.769bn, down 2.9 per cent in six months and down 3.4 per cent in the last three months.
The company pulled a sale of a 50 per cent stake in its Meadowhall centre because of the market turmoil, but it did go ahead with the £387m sale of the East Kilbride shopping centre, even though the price achieved was 2.8 per cent below the last valuation.
Equally, Warner Estate was not immune from the mood of pessimism afflicting valuers. Its Agora and Agora Max shopping centre funds saw capital values fall 1.9 per cent over the six months to September 2007.
Chairman Philip Warner asserted: "Yields have moved out across most sectors and the investment market is opague and uncertain; this is a reflection of the financial markets and limited transactional evidence, not of the occupational market."
However, some market evidence is still filtering through with two prominent shopping centres changing hands The Brenninkmeyer family's Redevco bought Glasgow's 100,000-sq ft Princes Square shopping centre and the adjoining Guildhall office building from Hermes and Invista Real Estate for £107m. And Multiplex has bought Friars Square in Aylesbury from F&C Property Asset Management and CBRE Investors for £89.5m, reflecting an initial yield of 5.13 per cent.
Built in the 1960s and substantially refurbished in the 1990s, Friars Square provides 306,000-sq ft of retail space producing annual income of £5m. Multiplex plans a major extension.
Have headline rents in shoping centres started to fall?
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