People queue to enter a Primark store as it is re-opening following the coronavirus disease (COVID-19) outbreak, at the MK1 Shopping & Leisure Park in Milton Keynes, Britain, June 15, 2020. REUTERS/Andrew Boyers Acquire Licensing Rights
LONDON, Sept 19 (Reuters Breakingviews) – Retail parks are a beacon of hope in a gloomy UK property market. On Tuesday, British Land (BLND.L) upgraded its rental growth guidance on these shopping developments, from 2%-4% to 3%-5% for the year ending March 2024. Demand from the likes of Primark, Sports Direct and discounter B&M has been strong. In the five months to Aug. 30, $3.5 billion British Land received 15% more in rents than it had expected.
A fall in rents explains the surge in demand. Since their 2015 peak, average retail rents have come down by a third, analysts estimate. For retailers that means that they can pay just 10% of sales to lease space, compared to around 15% historically. Retail parks are also good for e-commerce as they allow customers to drop off and pick up orders. That’s not the case on the high street, where business rates and high rents have driven tenants out. Last year, over 17,000 shops closed on high streets and other locations, up nearly 50% on 2021, according to the Centre for Retail Research. Still, British Land has other problems, namely the fact that two-thirds of its property portfolio consists of offices, which could see a drop-off in demand. Today’s 2.5% rise in its shares suggests investors need more than growing retail parks to be convinced of its prospects. (By Aimee Donnellan)
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
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