Vultures circle some 200 UK shopping centres on brink of administration

26 November 2018 3 min. read

A new report has found that over 200 shopping centres in Britain are in danger of collapsing into administration. As the UK’s retail sector continues to falter amid a fall in the pound ramping up import costs, stagnant wages and high inflation have continued to pressure consumer spending power throughout 2018.

2018 has seen the number of profit warnings by FTSE-listed retailers double since 2017, while the UK economy as a whole has seen profit warnings hit a high-water mark. Earlier in the year, a study by EY found that the dramatic rise has seen the number of top retailers flagging concerns in the first half of the year at a seven year high, as the sector continues to be plagued by rising costs and subdued spending.

British retail is currently enduring its most challenging period in five years, according to PwC. Averaging 14 closures per day, the UK saw a net closure of 1,123 stores in the first half of 2018 alone, with worse expected for the year as a whole. While this is often positioned as a crisis for the UK ‘high street’, the issues nonetheless stretch to shopping centre retailers.Vultures circle some 200 UK shopping centres on brink of administration

Now, a new survey from the National Retail Research Knowledge Exchange Centre has found that more than 200 shopping centres across the UK are teetering on the brink of administration, as their supply chains and major anchor stores experience rapid decline. Speaking to Retail Gazette, National Retail Research Knowledge Exchange Centre analyst Nelson Blackley said small towns are in danger of “catastrophic” ramifications as a result of this.

Blackley explained, “If the major anchor store moves out, that has a halo effect on other stores in that centre. It’s a downward spiral and you can’t fill shopping centres with nail bars and vape shops. People are suggesting a number of leading national retailers are on the edge and may close and that would bring shopping centres down with them. The collapse of BHS, two years ago, left empty units in around 200 shopping centres and more than half of those large, empty units have not yet been filled.”

Such a large-scale collapse would have a dire impact on local economies, potentially costing thousands of jobs. As a result, crime and vandalism could well increase in those locales, a factor which Blackley suggested was increasingly likely, due to the debt-encumbered nature of many centres. The majority of the locations at risk are reportedly under the ownership of private equity firms in the US, as are many stores which have collapsed during 2018.

According to Blackley, “They have to return money to their investors. That’s not looking very likely. Frankly, the centres are either going to have to be sold at a lower price or have capital injected in order to regenerate, and we don’t see banks having an appetite for that.”