St Mowden has offloaded nearly £90 million of its retail property assets in favour of industrial properties as the retail sector continues to burn a whole in landlords’ pockets.
The property giant has sold two shopping centre sites in Birmingham and Wembley, representing 27 per cent of its entire retail portfolio.
This includes the 22,000sq ft Longbridge Shopping Park in Birmingham, which was sold at a four per cent discount to Zurich Assurance for £53.6 million.
Longbridge is part of a wider £1 billion regeneration project which is understood to be around half way completed.
It includes various major retail names like Marks & Spencer, Poundland, Holland & Barrett and Carphone Warehouse.
Wembley Central, a shopping centre in north London, is also being sold to an undisclosed buyer for an estimated £35.3 million. The site spans 118,000sq ft and includes an 86-bed Travelodge.
“These disposals are in line with our strategic objective to increase our portfolio focus on assets with better structural growth characteristics and our intention to sell £100m to 150m of retail and small assets during 2018,” St Mowden’s chief executive Mark Allan said.
“We plan to use the capital we release via these sales to bring forward future phases of Longbridge and accelerate the delivery of our 7.5 million sq ft near-term industrial/logistics development pipeline.
“We intend to retain the majority of the latter for the longer term, which with a yield on incremental capex of circa nine per cent will deliver a marked income pick-up relative to the average yield on these disposals.”
This comes amid a swathe of CVAs in the retail industry, which allow retailers to abruptly move out of loss-making properties and negotiate rent reductions on the others.
Large property companies are subsequently favouring more industrial properties like warehouses, which have grown in popularity with the rise large online retailers like Amazon and Asos.
According to RICS UK Commercial Property Market survey, 43 per cent of respondents saw a drop-in demand for retail properties throughout the first quarter of 2018, marking the lowest level of demand since the height of the financial crisis in 2009.