In it's interim statement this morning Intu Properties paints an improving picture of the UK retail scene. A 15 month unbroken trend of increasing like-for-like non-food retail sales has encouraged more investment and as a result the IPD retail property capital value index has turned positive for the last two months. Despite this, footfall is down 2% at Intu and 4% nationally on last year.
The 16 Intu shopping centres have 95% occupancy, including 1% being traded by administrators. There is now genuine competition for space and new lettings are showing an 8% rent increase on like for like units in the quarter, on the previous rents. Demand for space is greatest from leisure and catering operators.
Intu has been contoversial in Nottingham where it owns both the Victoria and Broadmarsh shopping centres. It bought the 75% stake in the run down Broadmarsh from Westfield in 2011 and critics accuse Intu of allowing it to die. The City Council, which owns the freehold of Broadmarsh, regard Broadmarsh as the focal point of city development and see the Victoria Centre as disruptive to a coherent city centre redevelopment.
Intu has failed to produce a planning application for any changes at Broadmarsh and both in it's last annual report and in this statement, it is vague about it's intentions for that centre, just saying this time that it expects that after spending £40 million on a refurbishment programme at the Victoria centre "The second stage of our investment in Nottingham is expected to be a major repositioning and upgrading at intu Broadmarsh, to be followed by an extension of intu Victoria Centre."
Work is expected to start at the Victoria Centre in February and will take 12 months. The Council had wanted an assurance that Broadmarsh would be prioritised before signing it off. The plan is to create 12 new restaurants around the centre's clock tower entrance, but the declared Intu vision for Broadmarsh was for that to focus on small shops and restaurants. Victoria has a book value to Intu of over £300 million, whilst they paid just £55 million for Broadmarsh, so Nottingham probably has a long while to wait with the gateway to the city from the station being a very sad low occupancy shopping centre.
The dilemma in Nottingham of too much space, with some of it in the wrong place, is typical of most city centres around the country. Intu, in owning 10 of the top 25 shopping centres does not confront the problem too often, and where the local economy permits it is very much on the front foot with investment plans such as at Lakeside and Watford. The local economy in Nottingham is fragile, and is not helped by a City Council which is zealous in it's attempts to extract as much cash from visiting motorists as possible, which discriminates against the use of the city centre facilities.
Shares in Intu Properties closed last night at 345p , valuing the REIT at £3.344 billion.