Land Securities today said that it had been hit by the “particularly challenging” retail market, and that its destinations were not immune. But, it says, its exposure to sectors most affected by retailer difficulties has been reduced by its shift away from the high street, secondary shopping centres and retail parks in recent years, focusing instead on destination shopping. When retailers opt for a CVA (company voluntary arrangement), as more than 80 retailers and food and drink companies have since the beginning of 2018, affecting more than 6,000 stores, it says that retailers tend to choose to keep stores in Land Securities centres open. Some 93% of stores operated by retailers going through a CVA tend to stay open in Land Securities sites, compared to 85% for the market as a whole, it said.
Nonetheless it reported widening losses in its latest financial year as property values continue to fall. Land Securities revenue profits came in at £442m in the year to March 31 as rental income rose by 8.9%. But valuation deficits expanded to -£557m from -£91m last time, as its assets’ value fell by 4.1%. That meant pre-tax losses widened to £123m, from £43m a year earlier.
Some 18% of its retail portfolio is in London, and is primarily in shopping centres. Outside London it owns six shopping centres, five outlet centres and 17 leisure destinations. Its strategy in shopping centres, which include Oxford Westgate, Glasgow Buchanan and Trinity Leeds, is to focus on placemaking, while keeping the retailer mix and customer experience up to date.
Land Securities chief executive Robert Noel said: “We are driven by a clear purpose: to create sustained financial, social and physical value by providing the right space for our customers and communities so that people and businesses can thrive. A growing and ageing population, changing social aspirations, increased demand for digital and physical connectivity and the need to transition to a low carbon economy are reshaping the property market. Landsec has a vital role to play in this changing world and is well positioned to do so.
“To do this profitably and sustainably, we apply our industry-leading capabilities and relationships and act to keep costs competitive, working with imagination, skill and care. By getting this right, we build long- term shareholder value through the property cycles while making an important contribution to our communities. In a year marked by turbulent politics and a very challenging retail environment, our clear strategic focus has driven our performance and will direct our future actions.”
Noel was speaking as Land Securities reported widening losses in its latest full-year figures, and a day after figures from the British Retail Consortium www.brc.org.uk and Springboard showed visitor numbers continuing to fall. The BRC-Springboard Footfall and Vacancies Monitor showed a 0.5% fall in overall April footfall, compared to the same time last year - although a year earlier it had fallen by 3.3%. Retail parks (+2.2% April 2019/-1.8% April 2018) saw visits rise, but visits to shopping centres (-2.1% 2019/-3.1% 2018) and high streets (-1% 2019/-4% 2018) both continued to fall.
At the same time, the national town centre vacancy rate reached 10.2% in April - the highest since April 2015.
Diane Wehrle, Springboard marketing and insights director, said stores had not benefited from an April Easter as much as might have been expected – one of many challenges, including the rising vacancy rate, that is affecting retailers.
“On a more positive note, the +2.2% increase in footfall in retail parks in April was the highest since June 2017 and indicates that the British tradition of spending time and money on our homes and gardens during Spring endures,” she said. “Despite weak comparables for high streets and shopping centres in April last year, footfall in both failed to bounce back and their footfall is now at a lower level than in 2017; 5% lower in high streets and 5.6% lower in shopping centres.”
But she said that coastal towns (+1.8%) and historic, regional cities (+0.7%) had benefited from visitor numbers over the warm Easter weekend.
Image courtesy of Land Securities