Shopping centre owner Liberty International said today the number of its retail tenants going out of business had slowed and expressed "relief" at signs of stability - although not yet recovery.
The group, which owns a large part of the Covent Garden market area as well as Bristol's Cribbs Causeway, said business failures at its Capital Shopping Centres (CSC) regional sites had slowed from the "exceptional" rates seen at the end of 2008 and beginning of this year.
Liberty, which reported pre-tax losses had reduced by 1 per cent to £452 million for the half year to June 30, said resilient rental incomes and a deceleration in falling property values were signs of an improvement in the market.
Chief executive David Fischel said: "After a two-year period of exceptional turmoil, with the real estate downturn reaching its greatest intensity in the last quarter of 2008 and early months of 2009, we can, with some relief, report to shareholders welcome signs of at least a measure of stability, if not yet recovery, in property and economic market conditions."
Liberty said CSC's largest development, St David's in Cardiff, is on target to open in October, with around 125 new shops and restaurants being added to the existing site and making it one of the largest retail venues in the UK.
The firm said it was confident the enlarged shopping centre had a strong future, with the existing site already attracting 22 million visits each year.
"Cardiff is expected to rise to eighth place in the UK retail rankings on completion of the St David's development which has already attracted several new retailers to Wales," Liberty added.
It said retail in central London had held up well in the half year, with its Covent Garden estate 99% let and described as "trading well".
Footfall at CSC's centres has increased by over 3 per cent.
The UK regional business accounts for over 70 per cent of the group's total £6.1 billion portfolio.
While the group expressed some optimism for the future, it also stressed the scale of the downturn.
It said tenant failures amounting to over £30 million of CSC's rent in the last three quarters will "adversely impact" underlying earnings despite better re-letting activity.
In the last quarter of 2008 around 5% of CSC's tenants went into administration, followed by another 5 per cent in the first three months of this year.
"In terms of the tenant market we encountered an exceptional level of tenant failures in CSC's regional shopping centres in the last quarter of 2008 and first quarter of 2009 amounting in aggregate to over 10 per cent of CSC's rent roll," the firm said.
"The failure rate slowed down in the second quarter of 2009 and we have made steady re-letting progress."
Many of the lettings have been made on a short-term basis of less than five years. Liberty said this policy was made "at some cost in terms of rental levels", but added that the firm would benefit from the early expiries when the market recovered.
Occupancy has improved since March with the rate excluding tenants in administration increased from 95.4 per cent to 96.3 per cent at June 30 because of better re-letting activity and fewer retail failures in the second quarter.
Group net rental income dropped 2 per cent in the half year to £190 million, while tenant failures saw UK regional shopping centres 5 per cent below 2008 on a like-for-like basis.
Liberty said the fall in property values reduced to 4.3 per cent from 8.5 per cent in the first quarter amounting to 12.4 per cent overall.
The property investment market even began to strengthen in certain sectors, which allowed the firm to offload some of its smaller assets worth £187 million, which were deemed non-core to the business.