Cautious UK shoppers dent profits at shopping centres owner

Landsec, which owns shopping centres including Trinity Leeds, Westgate Oxford and Bluewater in Kent, has slumped to a first-half loss after being hit by store closures as retailers battle weak consumer spending and a shift to online shopping.

The property group’s chief executive, Robert Noel, said the general election and Brexit delay meant “continued uncertainty in the near term”. “The retail market continues to be challenged as retailers adapt to structural change, rising costs and a more cautious consumer,” he said. “Limited demand for space and poor investor sentiment is impacting rental and capital values.”

The last two years have been tough for the UK retail industry, as more than 7,500 additional shops have fallen empty. The most recent high street failure is Mothercare, which is shutting all of its 79 UK shops after calling in administrators last week. Others, including Debenhams, Monsoon and Arcadia Group, which includes Dorothy Perkins and Topshop, have used an insolvency procedure known as a company voluntary arrangement (CVA) to close shops, cut jobs and secure lower rents from landlords. Last week Intu Properties, the company behind shopping centres such as Lakeside in Essex, blamed CVAs for a 9% drop in its like-for-like rental income.

Landsec, formally known as Land Securities, is Britain’s biggest commercial developer. It builds and manages offices, retail and leisure destinations and lost £147m in the six months to September, compared with a £42m profit a year earlier. Retail parks outside London recorded the biggest decline in value, of 11.1%, while leisure posted a 3% decline as casual dining restaurants struggled.

“We have seen further high-profile CVAs and administrations in the period, notably Debenhams and Arcadia,” said Noel. “Clearly, we are not immune from these trends but … where stores have closed, we have had reasonable re-letting success – with more than half of units re-let or in solicitors’ hands as at 30 September.”

Rental income at the firm’s retail division fell by £2m or 1.5%. Nearly 4% of the firm’s retail space is empty and 1.4% of the total number of units are in administration, up from 0.9% in March.

Landsec has been selling retail parks outside the capital, such as Poole, to focus on its London portfolio and its better-performing shopping centres. It is trying to pull in more shoppers by offering pop-up beaches, student nights and dinosaur trails.