Many of the UK retailers had started their fight with the UK’s biggest proprietors. As a result of this ongoing collision between the two had resulted in the restructuring of leases for the property. Further, this will outcome in the formation of CVA (company voluntary arrangement) and will support the company to stay in business by rent drops and store closures. Due to this ongoing clash, the UK shopping centres have all but frozen up as buyers fight to assign good values to properties.
As per the data provided by the CoStar, a company that provides services related to information, marketing and analytics to the commercial property industry, in the first quarter of the year, proprietors were able to generate £20 million as compared to £783 million for a 10-year quarterly average. According to the head of UK analytics at CoStar, Mark Stansfield, it was the weakest quarter in the commercial property industry after 2003. Many properties transactions, for example, shopping malls and retail parks contributed only 9 per cent value in the first quarter as compared to 12 per cent for the same period of the last year and almost one third in the period between 2008-2011.
For real estate investors, sale or lease of the property to retailers was one of the main parts of their portfolio before the ongoing downturn in the commercial property segment. With the transition of customers towards online sales and retailers’ encounter with high operating costs resulted in the lower lease or rental income for the real estate investors.
The political and economic uncertainty created over Brexit had resulted in the occupational uncertainty. Due to this, ongoing occupational uncertainty has put the market on the sluggish mode, according to the director of UK retail investment at the property agency Savills, Mark Garmon-Jones. He further added that the majority of real estate Investors are concerned about the low income from the shopping malls as many of the retailers are planning to restructure their leases such as Debenhams and the Arcadia Group.
He further anticipated that many private equity firms were keeping a constant watch over the troubled sector. There are a variety of investors looking to hunt down distressed assets, many listed property companies are looking forward to redeveloping the sites and buyers are making it less valuable with the negative publicity.
According to a private equity firm Laxfield Capital, a company that monitor finance requests by property holders in the UK, the borrowing costs had been increased by twice against retail property assets over the last four years period. As per director at Laxfield, Emma Huepfl, the companies had used insolvency procedure after careful consideration to restructure their lease agreements. This had put uncertainty over the revenue from retail properties. Property lenders are finding it hard to access the risk created by the downside and how further it will go.
Ms Huepfl further added that the industry not anywhere near to establish stability as there is too much vacant retail space available and is yet to be utilised properly. The redundant assets are yet to be used for some other purposes.
Although the commercial property industry is on a downfall, there were some opportunities for the redevelopment. For example, Bards Walk shopping mall in Stratford was sold for £7.25 million in the first quarter ending March 2019 to Cervidae, who is looking forward to using it for its own business purpose.
With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities.
Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?
Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.
We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.