Hammerson upbeat as its supermalls prosper in Q1
But the uncertainty generated by its European peer’s £4.88 billion bid doesn't seem to be holding it back and the company also reported that business remains brisk at its shopping centre portfolio in the UK, Ireland, France and other European countries.
Hammerson said it does "not intend to finalise shareholder documents in relation to the proposed acquisition of Intu” while Klépierre's position "remains unclear”.
FLIGHT TO QUALITY
But it was generally upbeat as it released a strong Q1 trading update and said that its performance was underpinned by a “retailer and consumer flight to quality”.
It has seen strong leasing momentum in the UK, France and Ireland during the first three months of the year, which is good news after record activity in 2017 and given that the overall retail market is so gloomy at present in its key markets.
In fact, the company said that £7 million worth of group leases were signed in Q1, which is 59% above the level of a year ago - not bad for a quarter that’s traditionally quiet.
This clearly illustrates the strength of landlords running so-called ‘supermalls’ compared to many other landlords in the retail sector. Shopping centres may have suffered disproportionately from falling visitor traffic, but the biggest malls have certainly not seen declines. By contrast, they’ve been prospering and drawing tenants away from other locations.
Owning Birmingham’s Bullring, Victoria in Leeds, Brent Cross in London and tourist destination Bicester Village, among many others, has certainly helped Hammerson.
That said, a combination of severe weather and subdued consumer confidence weighed on retail sales at its UK properties in Q1, although Hammerson centres outperformed the market. And the company’s shopping centres beat the weak market in France too. Meanwhile, it said that its Premium Outlets’ sales grew by 4%, while Bicester Village alone delivered a double-digit increase in the period, buoyed by its recent major extension.
Demand from “luxury and aspirational retailers” also stayed strong for its Premium Outlets across Europe.
But has the company suffered from the high-profile retailer failures in its domestic market recent months? It seems not. Hammerson said the impact of headline-grabbing developments like the New Look CVA will be minimal and it continues to “work actively with retailers to maintain a more compelling customer offer and also provide right-sized stores for tenants.”
In fact, compared with the same period in 2017, occupancy for the portfolio has improved from 96.6% to 97.1% at 31 March 2018, above the group target of 97%.
And this is standing it in good stead as it waits to see whether its future is with Intu as it planned, or whether Klepierre will make another move.
But regardless of what happens in the future as far as the company’s operational structure is concerned, it's making good progress on major developments designed to make that future more profitable.
On Thursday it said that construction has started at Les 3 Fontaines in Cergy, France, while at the Brent Cross extension, London's first Cinema de Lux has been secured alongside an agreement for a new John Lewis store. That latter signing is particularly interesting given what John Lewis is doing with its newest stores - that is, turning them into experiential locations that are proving to be major visitor attractions and helping to lure more shoppers to the centres in which they’re sited.
VIEW FROM THE TOP
So what did Hammerson CEO David Atkins have to say? "Our strategy and the positioning of our portfolio continue to deliver a strong operational performance. Our attractive high-growth markets of Premium Outlets and Ireland are driving valuation growth and we are on track with our disposal programme.”
That disposal programme comes as the company is focusing on its most profitable properties and shedding those that it sees as non-core. And focusing on its top-performing properties means that the business can be upbeat despite the week environment in its main UK market.
Atkins added: "Whilst we recognise the difficult trading environment and challenges felt by many retail and restaurant formats in the UK, there continues to be good demand for space across our centres. The Easter trading weekend again demonstrated that not all retail is equal with our centres delivering positive footfall growth of 5% compared to average reported Easter footfall across all shops of -2.4%.”
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