Retail Property Vacancies Rise, Rent Drops and Capital Values?
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The retail property market has definitely had a bumpy ride during the recent years of financial and economic turmoil. The retail sector saw some of the biggest falls seen in the commercial property sector, with retail commercial property valuations plummeting by 40% up by 2009, according to the IDP Index.
Retail rents have continued to fall after other sectors, such as offices, have seen a limited recovery- 2009 saw real retail rents down 6%, according to the latest report from Capital Economics. They forecast the retail sector to remain sluggish, with the prospect of rents growing overall being knocked back to 2013- but this may be optimistic.
The commercial retail property market is driven to a large extent by the level of consumer activity, and there are many factors likely to hit consumer confidence further. First of all, there is VAT rise in Jan 2010. Add to that the impact of increasing Capital Gains Tax on higher price ticket items, and the possibility of inflated input prices being passed onto the consumer, and the retail sector may be looking at quite a bleak immediate future. Growth in shop sales is falling and the British Retail Consortium has recently announced that consumers are avoiding making large household purchases.
Across the wider economy, the severe spending reductions that the government is implementing, offer the depressing possibility of a return to a 'negative growth' - such a high proportion of the economy depends on government spending, that the cuts will inevitably strike GDP harshly. This all bodes ill for the market in retail property, which is showing signs of distress. Examples like this, in the Estates Gazette, are becoming normal:
"More than £200m of Retail Park sales have stalled over the past month, as increases in capital values continue to soften" (Estates Gazette, 19 June 2010).
"Active Retail Fund, which was established in 2004, and owns 3 shopping centres in Worksop, Newmarket and Antrim, has been put into receivership by its lender, Lloyds Banking Group."
Additionally, there are worries that recent reductions in the rate of insolvency amongst retailers are due to abuse of Company Voluntary Arrangements (CVAs). It seems some retailers, who are failing are using CVAs to get rid of those stores that are loss making, and then wielding the CVA as an instrument in negotiations with property owners. Many retailers have thereby reduced rents, and avoided unpaid rent obligations. With the subsequent fall in value of commercial retail investments, and reduced income, there is the potential for retail property owners to breach their banking covenants, ultimately leading to repossession.
So if you are ready to divest yourself of your retail property assets, you need to get a good grasp of their current value. This is where SellMyCommercialProperty can help you. We are a new commercial property company, with a massive amount of expertise in valuing a broad range of retail property, across the UK. We can make an initial assessment and valuation within 48 hours, if you need things to move quickly.
If the price looks good to you, we also have the ability to buy your retail property direct. SellMyCommercialProperty has access to substantial funds for placement in the retail property UK scene. We can therefore release equity from your retail properties fast- and much more painlessly than going through a commercial agent, as we don't charge fees. So give us a call today, and see how SellMyCommercialProperty can help you realise your investment in retail property.