Commercial property recovery might be short-lived warns economist as Hammerson culls retail parks

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A revival in property investment sparked by vaccination progress and an economic boost following the 12 April reopening might prove short-lived according to economists. 

Capital Economics wrote today: “A turnaround in returns during March hinted at a brighter outlook, though this mainly reflected favourable base effects.

“We think both structural and cyclical headwinds remain and do not see this as the start of a sustained recovery.

Annual total returns jumped from minus 0.5% in February to +2.6% in March, ending 11 months of negative returns, but Capital said this reflects both the big falls seen last March dropping out of the calculation and improvements seen in returns for industrial and parts of retail since last summer.

“With restrictions only unwinding gradually in Q2 and lingering scarring in some sectors, there is limited further upside in the near-term, despite the more favourable economic outlook.”

The downbeat assessment came as shopping centre owner Hammerson PLC (LON:HMSO) announced it had sold seven retail parks to Canadian private equity group Brookfield for £330mln in cash, an 8% discount to book value.

They include sites in Falkirk, Middlesbrough and Telford.

The property group has now raised a total of £403mln this year adding the proceeds to the earlier sale of Brent South shopping park (opposite Brent Cross) and other disposals.

Money from the sales will go to reducing its net debt of £2.2bn.

Hammerson chief executive Rita-Rose Gagné said: “As highlighted at the full-year results, our immediate priority is to strengthen the balance sheet.

“This latest disposal is a positive step.  Alongside this, we continue to focus on delivering operationally.

“We have successfully welcomed back our customers in England to our flagship venues, with footfall levels well above the June 2020 reopening, and look forward to reopening our other destinations as local restrictions allow over the coming months.”

Hammerson shares rose 2.45% or 0.89p to 37.89p.

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