Hammerson has announced that it is looking to redevelop its empty retail units, with a medium to long-term view of using them for alternative uses, such as residential, hotels or workspaces.
The landlord said there are opportunities to “reinvigorate the assets and grow revenue by filling void units, generating additional income streams and changing the tenancy mix to improve footfall”.
It said that in the near-term, examples of more capital-light reinvigoration would include “innovative” initiatives and partnerships for cultural, F&B and leisure experience offers, including food halls, event and destination spaces, health and wellbeing, boutique and roof top theatres, galleries and cinemas.
According to Hammerson, the biggest opportunity for redevelopment would be in its department store space, where it currently has over 800,000ft2 of void space or short-term leases. This space has an average ERV of £3 per ft2, meaning there “remains considerable upside”.
As it “considers our entire estates as space to be monetised”, it said its car parks also represent a future opportunity as they are underutilised today, and with changes in car use and travel patterns, they could “present additional income potential for the future”.
Hammerson said: “As we invest in our destinations and brands and continue to consolidate into prime retail space, we will attract new and successfully established occupiers to drive footfall.”
It comes as the profitability of its “prime” urban city assets have been affected by both Covid-19 and a lack of targeted investment over recent years to upgrade them.
News of the plans came alongside the group’s latest half-year results, where it reported that net rental income was down by 8% year-on-year. Adjusted profit rose by 14% to £20.1m however, reportedly benefitting from recovery in Value Retail and lower net finance costs.
Hammerson said that footfall in all territories has “yet to recover”, and is currently averaging at around 75% of 2019 levels. This follows an initial spike on reopening, with inner-city footfall still down on pre-pandemic levels ahead of a wider return to offices.
It noted that categories that have performed strongly during the period included jewellery, footwear and homeware, while the pandemic also created a “noticeable lifestyle shift” with a demand for outdoor entertainment and facilities, a trend it expects to continue in the long term.
Rita-Rose Gagné, CEO of Hammerson, said: “We have continued to respond to the changing landscape during the first half of 2021, which again was impacted by Covid-19. As we emerge from a unique moment in time, I see a pathway to create sustainable value as we transform the business to become more agile and able to anticipate and respond to this change.
“We own flagship destinations around which we can curate and reshape entire neighbourhoods and city centre spaces for generations to come. To realise this opportunity we are focused on continuing to de-lever the balance sheet through disposals of non-core assets, creating a leaner and more agile organisation, driving value in our destinations and accelerating our longer term developments.”