UK Shopping Centres: Where Did It All Go Wrong?

Posted by Knight Frank Newcastle on 5th July 2024 -

The decline of shopping centres throughout the last 15 years’ retail evolution has been much documented. Few assets have been immune. Borrowers and lenders alike have had to write off huge losses.

The growth of e-commerce and the fundamentals of countrywide oversupply have taken the brunt of the blame, but modest management and a lack of investment have certainly played their part.

MSCI/IPD data shows that since 2005 the “all shopping centres” group has declined in value by 67%. However, it is notable that the top quartile has only declined by 12%, while the bottom quartile has fallen by 91%. Not surprisingly, the older the scheme, the greater the decline in value recorded, with 1960s schemes falling by 74% while those built post 2010 have only had a 54% decline.

The question we asked was whether these statistics were supported by market evidence.

Transactional data over the last 20 years shows that values typically fell by 30-50% between 2005 and 2015, and then fell a further 60-90% between 2015 and 2023. This gives a typical aggregate loss since the 2008 financial crash of 80-90%.

To look for trends, we considered centres that traded in 2005-2007, again in 2012-2015 and have subsequently re-traded again since the Covid-19 pandemic. These triple trades generally give clear, factual evidence of value movements at a point in time.

Through examining these trades, we were able to see some clear patterns, from which we can perhaps learn lessons for the future.
 

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