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Source: ONE News
Scores of shopping malls across Britain face a battle to survive
an extended recession unless the government suspends a toxic tax on
landlords' empty space, the retail property head of adviser
DTZ said.
Mark Williams, who also chairs the British Council of Shopping
Centres (BCSC) Secondary Taskforce, said the tax was an additional
toll on some regional mall owners who were already imperilled by
mortgage breaches as the value of their assets dwindled, ramping up
the threat of repossession.
"We're concerned that a combination of falling asset values,
falling rents and this toxic tax on vacant commercial space is
draining vital investment away from secondary retail centres, which
as a consequence are failing to meet the needs of the local
population," Williams said.
Under British tax rules, commercial property landlords must pay
business rates on their properties even if they are unoccupied.
Trade bodies, who describe the charge as a tax on failure, say
the funds would be better spent on improving real estate to attract
tenants and promote business in the local area.
As Britain's retail industry braces for another challenging
Christmas trading period, Williams said the BCSC was researching
how many landlords had fallen foul of loan-to-value covenants and
the likely stance of banks towards these troubled assets.
"We anticipate there to be certainly in excess of 100 centres in
breach of their loan-to-value covenants, but we are doing further
work to guage that," said Williams, adding that not all of these
were destined to go into receivership.
No firesales
Because of their larger lot sizes, shopping mall purchases were
typically funded with 70% bank debt in the run-up to the property
slump, which slashed an average 45% from commercial property prices
between June 2007 and August 2009.
This crash has eroded the equity investment in dozens of regional
malls such as Stockport near Manchester and Wallasey near
Liverpool, leaving banks with an onerous task of preserving cash
flows and helping stricken retailers stay solvent.
More than 31 million square feet of retail property space - the
equivalent to around 30 of London's famous Harrods department store
- either fell vacant or into receivership between November 2008 and
September, as huge retail chains such as Woolworths, MFI and Zavvi
collapsed during the credit crunch.
Despite the enormous burden of keeping these community focal points
and employment hubs alive, Williams said banks were not interested
in selling out.
"We don't expect banks to take a fire-sale attitude on these
properties. Early indications are the banks are just as concerned
about these assets as the industry," said Williams.
"But they are starting to realise they can't succeed in keeping
these centres afloat unless they get help from people who know what
it takes to bring retailers and shoppers in."
Even with such expert guidance, Williams said it was still unclear
the economy was over the worst.
He said rents had bottomed out in prime and good secondary
properties, but the lettings market for weaker centres remained
depressed after the opening of eight million square feet of new
retail space last year.
Benchmark data provided by Investment Property Databank on
Wednesday showed falling rents were choking the recovery in
commercial property prices.
"This has been the perfect storm for retail property markets,"
Williams said.
"First we had the expected slowdown in prices as the UK real estate
cycle matured, then we had the withdrawal of bank funding during
the credit crunch. Now the consumer is looking weak and rents are
falling. Every challenge has hit at once," he said.
