RPT-UK riots may curb property investment in suburbs

Wed Aug 10, 2011 8:37am EDT

(Repeats to additional subscribers)

* Riots may curb investors move away from central London

* London's property safe haven image may be damaged

By Brenda Goh and Thomas Bill

LONDON, Aug 10 (Reuters) - Property investors will think twice about pouring money into UK retail assets outside of central London after rioters damaged shops and malls around the country, undermining renewed interest in already-struggling secondary locations.

Overnight riots, mainly hitting Manchester, Liverpool, and Birmingham, saw shops torched and shopping centres broken into, mimicking scenes seen in London districts, such as Clapham and Hackney, over the past three nights.

"The riots were more bad news for a (retail) sector already struggling," said Harm Meijer, a property analyst at JPMorgan. "It is not a huge disaster at this stage but you could expect a small impact on estimated rental values," he told Reuters.

This year, global investors have become increasingly interested in out-of-London UK shopping centres, chasing attractive yields and value-add opportunities. Possible mall buyers include a raft of property companies, funds, and sovereign wealth funds from around the world.

International investors "will probably be more wary of looking at some of the (London) suburbs," said Richard Lewis, property director of developer Town Centre Securities .

Televised coverage of burning buildings and looting will serve as yet another negative in what has been a tough year for the UK high street, with dismal vacancy rates, rents and capital values, and a fresh round of retailers shutting up shop already expected.

Shopping malls damaged included Hammerson's Bullring in Birmingham and the Manchester Arndale Centre, co-owned by Prudential and Capital Shopping Centres . CSC and Hammerson were repairing their malls, which had reopened.

Meijer said the riots could serve to undermine London's image with global investors as a safe haven, which was behind the fast run-up in prime central London prices.

"On top you get these messages sent to the outside world, where it is the lead news item in many countries. It's bad timing," he said, noting the share market was also down.

Philip Selway, head of the global property wealth team at broker Knight Frank said security was one of the top priorities for overseas investors in London.

"The stock market worries us more at the moment but if the rioting became a regular occurrence or the army was put on the streets, for example, that would be a concern," he said.

Jonathan O'Regan, senior surveyor, UK Investment at broker Savills , downplayed the impact. "For our investors, it's all about the long-term view, so I don't think it's going to have an effect. It will pass as quickly as it came."

Jeff Adams, chief executive of London-based developer United House, which has projects under construction in Clapham and Hackney, two of the riot flashpoints in London, said: "Police asked us to close down our sites early to make sure there were no bricks lying around.

"Other than that I sense it is business as usual so far from our sales operation," he said. ($1 = 0.617 British Pounds) (Reporting by Brenda Goh)

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