Capital & Regional comment: why investing in retail malls may not always be such a bad idea

Sir Philip Green's Arcadia retail empire has scraped through plans to close stores: PA

Two news stories today seem to contradict each other.

First, we wake up to news from PWC that 16 shops are closing every day on Britain’s high streets every day. Then, we learn that one of our bigger shopping centre owners, Capital & Regional, has attracted a potential major investor from South Africa.

So, if the High Street is suffering such a dramatic downturn, why on earth would anyone be wanting to invest in it?

The question is more puzzling when you consider that C&R announced the investment talks today alongside some pretty grim looking trading figures. Rental income down, valuations down, a £1.3 million hit from CVAs from stricken Debenhams, Arcadia, Monsoon and Select.

Is Johannesburg-listed Growthpoint completely mad to be interested in bidding?

Perhaps not. The point is, the value of UK retail real estate has plunged so far, so fast, that bidders are starting to think it may be worth a punt. Particularly those buying these sterling assets in foreign currency (although Growthpoint’s South African rands are hardly the strongest).

That explains why Hong Kong’s richest family have bid for Greene King, with all those juicy pub properties.

Furthermore, C&R – which operates close to residential areas in areas like Ilford and Walthamstow - is increasingly striking deals to sell land in and around its retail sites to other uses for the community. It just made £5 million selling land behind its Wood Green shopping centre to be developed into flats, and has another residential scheme in the pipeline.

As developers and investors realised years ago, they built far more shops before the financial crisis than the country needed. The job now is to put the empty ones to new uses.