Bluewater owner Landsec reports £1.4bn loss as Covid hits sales
Company, which also owns Trinity Leeds shopping centre, says central London recovery might be slow
Last modified on Tue 18 May 2021 07.28 EDT
Landsec, one of Britain’s biggest property companies, has warned of a slow recovery in visitors to central London and a sharp increase in retailer insolvencies at its shopping centres once government support ends, as its full-year loss widened to £1.4bn.
The company, which owns the Trinity Leeds shopping centre, Bluewater in Kent and the O2 Centre in London, said its rental income fell by 30% in the year to 31 March. This pushed its loss before tax up to £1.4bn, from £837m in the previous year.
Visitor numbers at its shops in central London fell 82% over the year.
Landsec reported that sales at its outlet malls such as Braintree Village in Essex were up 14% on 2019 levels since the reopening of shops on 12 April. “I was encouraged to see the relish with which people returned to experience in-person shopping as the easing of lockdown measures began in April,” said Mark Allan, the Landsec chief executive.
However, Landsec warned that it does not expect a quick recovery in its central London business, with tourism likely to be constrained, future office working patterns still unclear and lingering concerns over the safety of public transport. Including offices, central London makes up nearly 70% of its portfolio by value.
The surge in online shopping during the pandemic has piled further pressure on traditional shops and Landsec plans to sell all its retail parks over the next two years. “For most of the retail sector, it is clear that online is now the primary growth channel and will remain so,” said Allan.
He said the company was making good progress on its plans to sell £4bn of assets in the next few years, including its hotels, leisure properties and retail parks. It intends to buy more prime shopping malls, capitalising on their falling values.
Tim Leckie, a European property analyst at JPMorgan Cazenove, noted that the decline in shopping mall valuations had slowed, saying: “We think we are through the worst in the UK.”
Landsec is also investing in its “urban opportunities” portfolio, which currently contains five suburban London shopping malls, which it wants to turn into mixed-use regeneration projects including homes.
The firm’s regional malls, which make up almost a tenth of its overall portfolio, lost nearly 40% of their value, falling to £1bn during the year.
There are expected to be fewer physical stores in future, rents will be lower and shopping centres will have to offer something that cannot be easily replicated online. The company is in discussions with a number of digital brands that are looking at opening shops, following the example of the fitness company Peloton.
Landsec made further bad debt provisions of £127m during the year on top of £23m reported last March, to prepare for an anticipated sharp rise in retailers filing for insolvency when the government’s Covid support measures for businesses end.
Along with rival British Land, the firm has called for rents to return to normal levels in June, but proposes that rent arrears be ringfenced and payment deferred to allow landlords and retailers to negotiate concessions by the end of the year, with a binding arbitration backstop if agreement cannot be reached.
Allan said offices owned by Landsec were one-third full as of this week, a figure that it is set to rise to 60% by the end of June as more workers return to their desks. Landsec owns Deutsche Bank’s new London headquarters and an office complex near St Paul’s Cathedral. He expects demand for office space to hold up, as companies want well-ventilated offices with fresh air circulating and more outdoor space, and said offices older than a decade were obsolete.
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