Shaftesbury says West End footfall is resilient but Brexit could hurt tenants
Major London landlord Shaftesbury saw its portfolio value rising almost 4% to £3.95 billion in the year to September as it shrugged off the wider UK retail downturn due to higher rents and its strength in areas such as Covent Garden and Carnaby.
Those areas are shopping magnets for both tourists and locals and continue to attract fashion shoppers in their droves, as well as being the focus of brand flagship activity.
The company said that “the West End's global appeal and resilient, broad-based economy provide considerable insulation from headwinds affecting the national economy and consumer confidence.” And it reported “robust trading, footfall and occupier demand across our locations [with] continuing rental growth and low vacancy.”
Shaftesbury increased its net income from its properties by 6.2% to £93.8 million, but its net profit actually fell as much as 41.8% to £175.5 million as its property value rise was smaller than it had been a year ago, reflecting general issues in the UK economy.
But CEO Brian Bickell said: “Footfall and spending in our locations continues to be largely unaffected” by the combined weight of cautious consumers, a sluggish economy and online migration.
However, he warned that a “disorderly Brexit” could hurt its business, as its tenants could face a range of problems such as staff shortages, higher import prices, and problems in sourcing stock.
And it’s clear that the economic situation and the UK’s tough retail climate are already having an impact on potential tenants. The company highlighted that issue as far Thomas Neal's Warehouse, in the heart of Seven Dials, was concerned. The landlord had originally concluded a deal to let the almost-23,000-square-feet of space to "an international retailer", but the unnamed company withdrew in August. It didn’t take long for Shaftesbury to find a replacement but it’s not an international brand, it’s a company running a food market and dining concept, and this will open next summer.
That’s a trend being seen elsewhere too, with a food concept having also moved into part of the Oxford Street space left vacant by the BHS collapse two years ago. We have to assume that as time goes by, fashion brands will vacate space and while landlords will replace them, it may not be with another fashion brand.
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