Hammerson has revealed a recovering UK retail market helped its 2010 profits rise 11 per cent, but cautioned over the impact of Government austerity cuts.
The firm said the increase in VAT and actions to slash public spending could see some embattled retailers fall behind with rent repayments as it signalled the threat of a potential relapse after the sector’s recovery last year.
The group said 2010 was a turnaround for many retailers as trading conditions improved and administrations declined, but added it would not start any major capital projects without “substantial” pre-lets.
Hammerson’s development pipeline includes a 46,000 sq m office development at London Wall Place, on the former St Alphage site, for which it submitted a detailed planning application in 2010.
The firm also has a cleared site and is seeking a pre-let at Bishops Place, a proposed mixed-use development with 52,000 sq m of office space.
Planning consents for an additional 7,700 sq m of retail and leisure space at Silverburn, and for a 1,000 sq m restaurant quarter at Bullring have also been granted.
In January 2011 the group received consent for a 930 sq m extension to Queensgate, which will allow Primark into a new 5,500 sq m unit as part of a £20 million upgrade of the scheme.
The firm’s full-year results revealed underlying profits of £144.5m in 2010, up from £130m in 2009.
Retail vacancies fell as the recession saw many new developments cancelled or put on hold, which helped overall occupancy levels rise to 97.3 per cent.
The firm said: “The effects of increased taxation and restrictions on government spending may mean that some tenants, principally in the UK retail sector, face difficult operating conditions and there is a risk that they will be unable to pay their rents.”
It said it should be protected from widespread rental defaults thanks to the scale and geographical spread of its tenants.
Hammerson chairman John Nelson, said: “This is a strong set of results which reinforces the strategy we are pursuing. Our rigorous focus on the performance of each asset is improving occupancy and income.
“We have sold mature assets and reinvested in properties which offer better growth prospects through active management.
“Looking forward, our financial flexibility and continued asset recycling will allow us to continue to take advantage of opportunities which we believe will arise in the coming period.”