In its full-year results to March 31, property giant Landsec has highlighted the impact of the coronavirus pandemic on the retail sector. The company’s “revenue profit” declined 6.3% to £414m ($512m), while its pre-tax loss widened to £837m from £123m in the previous year. Landsec’s retail segment alone faced a 20.5% valuation deficit, contributing to a decrease in the company’s combined portfolio value by 8.8% to £1.179bn. However, despite these challenges, Landsec assured investors of a healthy balance sheet.

Landsec’s properties continued to maintain high occupancy rates, but its like-for-like net rental income, before provisions for next year’s rent, decreased by £4m or 0.7%. In the retail sector, the figure dropped by £10m or 3.9%. Nevertheless, Landsec’s retail destinations outperformed national benchmarks in terms of footfall and sales. Footfall decreased by just 1.2% over an 11-month period, compared to the national benchmark figure of 3.7%. Similarly, same-centre sales rose by 0.9% during the same period, while the benchmark figure reported a decline of 3.2%.

The immediate impact of Covid-19 significantly affected Landsec’s retail operations, resulting in the complete closure of four of its centres. Rent collection rates in March and April were also lower compared to the previous year, with 63% of rent collected within 10 days, compared to 94% in 2019. Rent collection rates for June are expected to fare worse due to the concentrated negative economic impact of Covid-19 in the second quarter.

However, the pandemic has amplified an existing decline in the retail market. Landsec highlighted the pressure on rents caused by changing consumer shopping habits and rising costs for retailers, leading to substantial declines in valuations. Mid-market fashion in London has particularly struggled, leading the company to predict a shift away from fashion and an increased demand for occupiers focused on service and experience.

While Landsec currently holds a significant exposure to non-retail property, it may reconsider its weighting in the struggling retail sector. Retail parks currently comprise just 3.5% of its portfolio, and the company will continue to monitor its exposure to this sector. During the year, Landsec sold one retail park for £45m and emphasized the strong performance of its outlets segment. Using consumer research and sales data, the company added 33 new brands to its outlets, enhancing its line-up. Brands such as Loake, Dune, Belstaff, and Penhaligons were introduced at Gunwharf Quays in Portsmouth, while Polo Ralph Lauren helped boost the performance of Braintree Village, attracting premium retailers like Kate Spade and Lyle & Scott.


1. Landsec
2. Retail Week article