Article

Living with the new normal

What does 2020 hold for shopping centres?

Overview

Our Restructuring Services and Real Estate teams continue to monitor the UK Secondary Shopping Centre investment market to identify trends and understand the impact that structural changes in the retail market may be having on the sector.

The market for shopping centre investments remained firmly depressed throughout 2019 with near record low transaction volumes. The thin market reflects continued investor scepticism about the sector and continued pricing challenges between vendors’ aspirations and levels where purchasers are prepared to engage.

But some investors have been calling the market and starting to buy up selected assets with plans for transformational repurposing suggesting that in some cases prices have fallen enough to make such schemes stack up financially. Elsewhere, further up the quality curve there is a concern that the price correction in the market still has further to run.

Shopping centres are facing their own existential crisis and owners and investors are being forced to think creatively about what the future holds.

What can owners and lenders do?

Make realistic appraisals of a centre’s future prospects, evaluating all potential uses and opportunities for each site taking into account actual and alternative uses.
Accept that there is a ‘New Normal’ for the sector, which requires more aggressive and proactive management than ever before.
Work to understand and build strong relationships with the key stakeholders in each and every location – Local Authorities, retailers, consumers and residents.
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