GlobalData says supermalls are still winners, despite mega-merger collapse

Does the cancellation of the Hammerson-Intu merger mean the supermall concept in the UK isn't as strong as we thought it was? Not at all, according to analysts at research firm GlobalData. 


Intu


It issued a statement backing the supermall concept on Wednesday after it had emerged that Hammerson was pulling out of the proposed Intu deal.

Sofie Willmott, senior retail analyst at GlobalData, said that Hammerson had pulled out for a variety of reasons, with the weakening UK retail scene certainly being a factor in its decision-making. It clearly doesn't want to expose itself to large numbers of retailers potentially closing stores in Intu’s UK shopping centres as the sector is hit by a wave of business failures and Company Voluntary Arrangements (CVAs) that would allow retailers to exit leases early and close stores.

But while many retailers, including some in the fashion sector, are looking to shutter some of their locations, GlobalData thinks large mall operators won't be the biggest sufferers.

And that view was borne out by Intu itself. It was upbeat earlier this week when it released its latest results report. It said it had signed a large number of new leases and enjoyed higher footfall in Q1 and outperformed the sector as a whole.

GlobalData’s Willmott said that the dominant names of the UK shopping malls sector should continue to prosper as both Hammerson and Intu own and operate some of the biggest shopping destinations in the country.

“Although many retailers have plans to trim down their store portfolio this year in response to lacklustre physical sales, rising operating costs and spend shifting online, it is unlikely that shopping centre stores will be the ones they choose to close given the destination appeal of these locations,” she said. “Retailers such as Zara, H&M and River Island are prioritising their shopping centre locations and upsizing their stores in supermalls.” 

The researcher classifies a shopping centre as a supermall if it covers over 20 million sq ft and has more than 20 million visitors annually. 

Willmott said major names opening flagship stores at such locations adds to their allure. And given that the biggest shopping centres are the ones that also have the best leisure and experiences offer, “consumers with increasingly high expectations” are more likely to visit them than other retail locations.
 
‘‘Though Hammerson has abandoned the deal in order to protect its own interests and reduce the risk given the tough retail climate, both shopping centres owners will be better protected from changing consumer spending habits in comparison to landlords of other retail locations, namely town centres,” Willmott added. “GlobalData forecasts spend in supermalls to outpace growth in town centres over the next five years as consumers continue to gravitate towards experience-led destinations with a broad retail and leisure offer.’’

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