Intu the unknown - Could shopping centres become homes?

It may be that we’re facing another year - make that yet another year - of disruption in the housing market.

Coronavirus may lead to significant changes in public behaviour and the return of economic uncertainty, even for just a few months.

For many that will be frustrating, especially after a strong start to the year, but at least the market will return when the virus threat recedes.

Not so the problems in the retail sector of the commercial property market where coronavirus - if it has an impact on footfall - may be the least of its worries.

I wrote back in August last year about the dismal first half of 2019 for Intu, Britain’s largest retail landlord which owns 17 of the country’s biggest and best-known shopping centres, including Manchester's Trafford Centre and Lakeside in Essex.

It’s fair to say that in the second six months, however, dismal became despairing.

Here are the figures, and they make Countrywide’s residential business performance look positively beaming by comparison:

- Intu has a £4.5 billion debt;

- it has abandoned its attempt to raise £1.5 billion after investors snubbed the offer;

- Intu’s share price (408p in 2011 and 372p in 20915) is now around 5p;

- 15 centres have been devalued, 14 of them by 18% to 33%;

- in 2019 its total revenue fell from £581 million (2018) to £542 million;

- rental income fell proportionately even more, from £451 million (2018) to £402 million now.

To hammer home the point, here’s a key paragraph from a trading statement earlier this month: “Intu’s portfolio value has declined by 32.2 per cent on a like-for-like basis between 31 December 2017 and 31 December 2019, with a like-for-like decline of 13.3 per cent.in the year ended 31 December 2018 and a further like-for-like decline of 21.9 per cent.”

The landlord may or may not survive; in its recent statement it listed 27 risk factors which may impact negatively on its future performance and value.

So, what has all this to do with the residential sector?

Let’s return to a well-worn theme: many of the locations of Intu’s biggest assets are city centres or out-of-town with parking. Both, one might think, would be suitable for homes.

It’s not that major shopping centres will no longer exist, but it’s certainly the case that as online shopping grows further, such centres will no longer need to be as large; landlords like Intu will have to diversify, accepting other uses on their sites.

Councils, too, which in the past have measured success partly by their ability to attract big name occupiers to gleaming shopping centres, will be obliged to reshape their strategies.

What’s wrong with a mix of housing and large stores on a site like Bluewater or the Trafford Centre? A few in-town modern centres - Exeter’s Princesshay, for example - do exactly that, albeit on a much smaller scale.

Expect more of that in the near future, as soon as the retail landlord mindset eventually catches up with new consumer shopping habits.

When change comes it will help those landlords out of a fix and assist residential developers find new large-scale sites - a win-win that could finally resolve a problem that’s bedevilled the country in recent years.

Now wash your hands thoroughly - we’ve got a virus to beat, too…

*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting about all things property at @PropertyJourn