The gap between the best shopping centres in the UK and the rest is widening and landlords increasingly have to deal with more pressure from their bank due to loan to value covenants and income levels required to service loans warns Adams & Remers.
Joe Covill, partner in the commercial property team at Adams & Remers comments: “There is a two speed, two tier market with the prime shopping centres doing well and expanding because they offer a destination and the broader experience of a day out which the secondary centres cannot compete with.”
“Landlords of the secondary centres are being hit hard at the moment and every time they lose a tenant it is harder to replace them. The loss of tenant mix to attract customers and empty units can make the centre feel less attractive and also leaves a reduced budget for marketing and events.”
“There is a direct effect this all has on loan arrangements and banks are being swift to put pressure on landlords at the moment and want to know what they are doing to improve their position. Landlords need to be watchful that they are following the terms of their loan agreements or take appropriate advice if they are in danger of breaching them.”
“For landlords looking to sell a shopping centre, the loss of tenants can lead to a reduction in price and the landlord may be required to provide rent guarantees or top ups which can make a material reduction in the proceeds of the sale and the ability to repay their bank upon the sale.”
Joe Covill concludes: “Lenders will be watching the wave of store closures which are taking place already this year and landlords should be prepared for questions from them if they haven’t been in contact with them already.”