1 in 5 shopping centres risks defaulting on loans

BCSC’s Secondary Centres Taskforce – a group of cross-sector partners from the property, retail and banking sectors – commissioned the research to investigate the extent of the problems facing secondary and tertiary centres, the approaches being adopted to manage these assets and the action needed to facilitate their improved performance. This included face-to-face interviews with a number of banks, property companies, appointed administrators and retailers.

All parties interviewed said that the four main detrimental factors contributing to secondary centres falling into administration or breaching loan payments, were:

* A lack of investment;
* Poor asset management;
* Failure of a number of national retailers;
* Poor due diligence at the time of purchase.

In spite of these challenges, lenders involved in the research stated that they were taking a pragmatic approach in their willingness to extend credit for capital improvements and working with borrowers to ensure administration was a last resort. However, the establishment of a flexible asset management plan was identified as an important success factor and a key condition of further lending.

Neil Varnham, BCSC President, said: "Shopping places are often the lifeblood of local economies and communities – particularly in our smaller towns and cities. The failure of these centres can be detrimental to all parties involved – consumers, local authorities, owners, retailers and banks and requires a collaborative, long-term view from all parties involved.

"Banks will only fund investments that make economic sense and this will ultimately drive their lending strategy. The role for a good asset manager is crucial to ensure that their investment is being managed effectively, bringing an understanding of retailers and consumers to attract new tenants, drive footfall and sales. There is a role for the retail property industry to play by addressing the perceived skills gap in asset management expertise."

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