Landsec, the retail property group, expects shopping centre rents to fall because of the impact of the Covid pandemic and an “ongoing structural shift to a lower rent model”.

Landsec, whose portfolio includes outlet centres and regional shopping malls, reported in its interim results that estimated rental values (ERV) “across our estate will need to fall 35% to 40% from their 2017/18 peaks in order to reach a sustainable level with retailer total occupancy costs in the low teens. This would imply a further decline of around 15% from September ERVs.”

Regional shopping centres such as Bluewater and Trinity Leeds comprise 11% of Landsec’s estate. 

Landsec said that outlet centres, accounting for 7% of its portfolio, “remain an attractive asset class with good growth prospects underpinned by a compelling consumer offer, but have been disrupted in the near term by Covid-19”.

The group recorded a £118m fall in net rental income in the six months to September 30.

Landsec reported: “The decrease in net rental income was driven by a £39m reduction in gross rental income and an £85m increase in bad and doubtful debt provisions reflecting the impact of Covid-19 on turnover rents and cash collections.”

One of Landsec’s strategic priorities is its ‘Reimagine retail’ programme, which includes “understanding and monitoring sustainable rents, which will form a more effective basis for decision making” and “elevating the consumer experience, involving initiatives to increase footfall and dwell times”.

The company said: “We have plenty of initiatives under way and expect to show clear progress in each area over the next six months.”

During the pandemic, Landsec established an £80m customer support fund to help businesses such as retailers that were struggling.