Land Securities’ attempt to offload its Bullring stake will define the fortunes of the city’s retail sector for the remainder of 2008, according to a leading Birmingham property agent.
David Smeeton, who heads the Colliers CRE office, believes the success of the unexpected move will indicate if Birmingham’s retail market is on the way back up – or staying in the doldrums.
“It’s safe to say that no one expected Land Secs to try to offload its stake, in the midst of the deepest economic recession for years, especially with a reported price-tag of £300 million,” he said.
“I think we can regard this transaction as the perfect barometer for the Birmingham retail market. If they get the deal away, everybody will gain a huge boost of confidence. If they don’t, it will send all the wrong signals.”
Mr Smeeton’s comments come as Colliers CRE issued its latest assessment of the health of the UK’s shopping sector.
It suggests that, unless the housing market recovers earlier than predicted, the sector has ‘weak’ prospects for the remainder of this year and next.
“A new phrase is in vogue, ‘sweating the portfolio’, meaning that retail investors and developers really have to make the most of their assets,” said Mr Smeeton.
“Cash-rich investors have begun looking for bargains, and are using their strength to obtain discounts, even to what would be generally accepted as fair value. For the rest though, it’s very hard work.”
The Colliers CRE research suggests that work on major shopping centres is already tailing off, in many areas of the UK.
Its national director of research, Richard Doidge, said: “If there was slippage in this pipeline last year, this year it has become a landslide.”
However, Mr Smeeton says the opposite is true in the Midlands; citing both Wolverhampton’s Summer Row, and Leicester’s The Shires as examples of significant strategic projects which are coming forward.
“Both are the biggest things to happen in development terms, in their cities, for a very long time. If the local market is strong enough, there is no reason such projects can not succeed, regardless of the wider economic climate.”
Mr Smeeton does have concerns about future shopping centre proposals though.
“I think developers will encounter problems trying to achieve pre-lets, especially for retail anchors, because there will be an understandable reluctance to commit to a deal when the market is so volatile,” he said.
“I suspect traders will only be willing to commit themselves at the latest stage possible, meaning sleepless nights for developers and their advisers.”