A Scottish shopping centre owned by a global asset manager is up for auction with a starting price of £1, in the latest sign of the downturn in the retail property market.
The Postings centre in Kirkcaldy, owned by a pension fund run by Columbia Threadneedle Investments, is being auctioned through Allsop with a reserve price of £1 — implying a gross initial yield of 15.6m per cent, according to the auctioneer’s website.
The sale comes as a crisis on the high street begins to eat into retail property values. A wave of retail insolvencies and store closures in 2018 looks set to continue into this year as retailers battle with the transition to online shopping, higher costs and Brexit uncertainty.
The asset manager Fidelity International late last year forecast a fall of between 20 and 70 per cent in UK retail real-estate asset values, depending on location and quality.
Some shopping centres, including the Postings, are now being sold as opportunities to demolish and redevelop the site.
The eastern Scottish centre lost its anchor tenant Tesco in 2015, and a person familiar with the centre said it was now costing more to run than it generates in income. The sale is due to complete on February 15, Allsop said.
Columbia Threadneedle said: “We acquired the Postings more than 15 years ago as an income proposition and it has since been re-positioned as a development opportunity, which does not fit the holding fund’s investment strategy.
“The reserve price of £1 is generating significant attention and we expect to get a considerable amount at the auction.”
The centre is made up of 21 stores, of which 13 are empty, and a 299-space car park leased to the local council. It generates £152,005 of income a year, Allsop said, but leases on the occupied stores expire in 2020 or 2021.
One property executive said it was still “too expensive”. “There are going to be a number of locations where, due to the liability of business rates and the cost of demolition, there is a negative site value until [the shopping centre] can be demolished and built back into an economic use.
“There are places where these alternative uses may not stack up either.”
Columbia Threadneedle, which is owned by the US group Ameriprise, holds the centre — built in the 1980s for a reported £4.2m — within one of its institutional pension funds.
The Postings centre, which faces competition from another nearby shopping venue, the Mercat centre, has struggled to attract tenants because of its “out of date structure and location”, the person familiar with the sale said.
Preston Benson, founder of the Really Local Group, which specialises in high-street regeneration, said: “Well-located retail with redevelopment potential and supportive local councils will find a price floor above zero, but other [properties] will go straight to zero value with councils stepping in and taking over.”