The British Council of Shopping Centres (BCSC) has released a guide designed to promote investor confidence in the UK secondary shopping centre market, calling for a reassessment of inflated valuations made prior to the recession.
According to the industry body, up to one in five secondary UK shopping centres is at risk of defaulting on loans, representing an estimated £10bn of commercial property.
BCSC research conducted last year found shorter lease lengths and an increase in turnover-based rents, meaning ‘greater transparency and consistency’ was needed to boost commercial property investment.
The guide is targeted at commercial property lenders and investors and contains a set of guidelines to be used alongside existing valuation methods drawn up by the Royal Institute of Chartered Surveyors (RICS). It contains detailed notes from a working group of senior commercial property professionals, brought together by the BCSC, outlining their visions and setting out actions under the following headings: existing occupiers, rents and yields, lease expiry profile, recoverables and non-recoverables, repairs and refurbishment, service charge management, market position and competition, future development plans, sustainability, and commercialisation.
It includes an appeal for increased analysis and assessment of factors including viability, the nature of leases, prospects of planning permission, budgets and forecasts, demographic trends, and future opportunities.
The guide highlights changes in consumer shopping habits brought about by the Internet and social media and calls for greater involvement in the management of shopping centres and asset management strategies to create ‘attractive retail destinations that respond to consumer demand’.
The release of the guide comes amid reports that up to £1bn of secondary UK shopping centre commercial property is for sale. This figure is expected to swell as banks attempt to reduce their exposure to the sector. If demand for the commercial property start to wane because the stock is overpriced, this may well further dissuade investment, something we’re all looking to avoid.
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