(Bloomberg) -- A London auction showed just far internet retailers and slowing spending growth are hurting the value of some U.K. bricks-and-mortar stores.
Abbeygate Shopping Centre near Birmingham was auctioned off at a hotel on Portman Square on Wednesday for 4.3 million pounds ($6 million), a fraction of the 17 million pounds it fetched 13 years ago. The roughly 90,000 square-foot (8,360 square-meter) mall was bought by GoldLeaf Property Investments.
It’s already been a brutal year for U.K. retailers, with chains including Toys ’R’ Us and Maplin going into administration. Others, such as Carpetright, House of Fraser and New Look have sought to shutter stores or reduce their rent bills. That’s adding to the woes of smaller malls that were already struggling to compete with large shopping centers and online retailers.
About 90 percent of the space in the Abbeygate mall is occupied. However, the lease of anchor tenant Argos, which accounts for almost 13 percent of the rent, is due to expire next year. That means the new owner will have to negotiate an extension or be forced to find an alternative tenant. The mall currently generates rental income of about 768,000 pounds a year.
“These kind of shopping centers have shown a dramatic drop in value over the last 10 to 15 years,” Acuitus auctioneer Richard Auterac said in an interview before the sale. “It has taken some owners a long time, but we’re now seeing more acknowledgment that it’s a difficult market to be in,” prompting them to accept lower prices.
The auctioneer sold another mall, Callendar Square in Falkirk, Scotland, for just 1 million pounds in October, according to its website. That property had an estimated value of almost 26 million pounds in 2006.
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