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The UK retail property market is experiencing tough times. High street shops and shopping centres have been hit by retailer administrations and falling footfall.

The immediate challenge for lenders is ascertaining how much the collateral to their retail loans is worth. Data provider MSCI recorded a 5.7 percent decline in capital growth across the UK retail property sector during 2018. CBRE’s monthly index, meanwhile, showed an average drop of 10.5 percent for shopping centres over 2018. Fund manager Fidelity International’s prediction is a drop of 20-40 percent for prime retail, with secondary stock expected to fall in value by as much as 70 percent.

The lack of investment transactions in the sector means valuers have limited comparable data to draw on. Savills data show 2018 was the worst year for UK shopping centre investment volumes since 1997, with total turnover of £1.3 billion across 34 deals – down 60 percent on the long-term average.

The dilemma for lenders is whether to take enforcement action if loan-to-value covenants are tripped in their facilities. In this downloadable presentation, we examine the state of the market.