A leading London retail analyst has described in-town shopping as 'a bubble waiting to burst'. CSFB real estate analyst John Gellatly said that non- food retail has 'been sliding into deflation since 1998, with tenants being unable to afford any more rent'.
According to Gellatly's presentation, the future for in-town retail looks particularly bleak. It faces a decrease in consumer spending and retailers looking to find more affordable options. 'Operators such as Borders are already moving from prime locations into secondary, more affordable ones, and it is reasonable to ask whether retailers in highly rented schemes will soon start looking for smaller, more affordable centres to trade from,' said Gellatly.
With the big centres looking overpriced and yields firming dramatically, Gellatly said that he expected retail values to go the same way as the All-Share Index, which it tracks closely.
Already, Zone A rents in the big regional centres have remained static for the past three years. 'Big centres are certainly looking overpriced,' he said. He also expressed fears about bank loans secured on rental property.
'A major chicken looks set to be coming home to roost,' he concluded.