COMMENT I was at the Bluewater shopping centre in Kent the other weekend (I know, the excitement never stops). My two young boys were in awe of one of the centre’s latest attractions – a trail of life-sized superhero statues throughout the building.
We were constantly stopping so they could have photos taken alongside their favourite heroes and villains. In the food court they were imagining themselves wielding Thor’s mighty hammer. They snapped their fingers to wipe out half of humanity next to the diabolical Thanos outside John Lewis. They struck the signature poses of Iron Man, Batman and others. They loved it and are asking to go back.
It was a good example of what we’re regularly being told retail needs to do – give the public an experience, something to remember, something to do other than just trudge around the same shops. But if my boys have been convinced of the joys of a modern shopping centre, it felt this week as if they were firmly in a minority.
Grim results
Intu’s half-year results on Wednesday were as grim as expected. Valuations of the company’s UK shopping centres were down by more than 10%. Like-for-like rental income during the period fell by 7.7%. Pretax losses were £856.4m.
The company’s share price tumbled by more than 30%, slumping even lower than during the global financial crisis. “After the GFC we now have the ‘Great Fashion Collapse’,” quipped Jefferies analyst Mike Prew. Well, if you don’t laugh, you’d have to cry.
New intu chief executive Matthew Roberts tried to show a brave face given retail’s woes, which you’d expect given how recently he took the role. “With all the recent media articles around the death of the store, you could believe that no one will go shopping again,” he wrote in his results statement, arguing that instead the physical shop is “not dying, it is evolving”.
It’s a telling turn of phrase and can only make one think of the Darwinian evolutionary theory of “survival of the fittest”. Which of the big landlords with exposure to retail can truly argue that they are fit for purpose today, moving quickly enough to keep their portfolios in line with what customers want and expect from the high street, shopping centres and out-of-town retail parks?
Undoubtedly challenging
Intu was not alone in suffering. As I write on Thursday afternoon, Hammerson’s shares are down roughly a quarter since the start of the week, when it revealed a loss of almost £320m in what chief executive David Atkins described as an “undoubtedly challenging” UK retail market.
Corporate dealmaking in this market seems inevitable. At some point, intu, for example, may simply look like too much of a bargain not to be taken private. At the turn of the year, as others spoke of US venture capital eyeing UK take-private opportunities, Savills head of European commercial research Mat Oakley talked of a buying opportunity in retail. The two may soon converge. But for the moment, such a move likely seems too much like catching a falling knife for most potential buyers. Some risks would scare even a Marvel superhero, after all.
A quick announcement: next week’s EG will be an app-only edition, packed with all the usual news and analysis. We’ll be back in print on 17 August, and app-only the following week. Normal service will be resumed from 31 August. If you haven’t already done so, you can download the EG app in the App Store or Google Play Store to get your essential round-up of real estate news and analysis.
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