Retail property investor urges a fresh approach to valuation

An owner of UK shopping centres has urged lenders to encourage real estate valuation professionals to take a new approach to assessing retail property.

Speaking during a panel discussion at the Commercial Real Estate Finance Council Europe Spring Conference on 16 May, Mark Robinson, co-founder and property director at Ellandi, said: “No one is happy about how we value shopping centres. It needs fixing.”

Describing retail as the “most unloved sector in European real estate”, Robinson argued that investors in retail, as well as understanding how to reposition schemes, need a realistic assessment of what shopping properties are worth in today’s market. The key to investing in the sector, he said, was “knowing where the bottom is, and knowing what good looks like”.

Another panellist, M7 Real Estate chairman Tony Edgley, argued that owners of retail assets need to adapt the way they run them. “Since the Magna Carta, we’ve had a world of landlords and tenants where never the two shall meet,” he said. “And now they are. It’s happening in retail, in co-working, and owners are participating in partnerships with customers.”

Robinson went on to argue that a true assessment of property values could only be achieved by considering them as operational assets. He urged finance providers in the audience to encourage such an approach from those in the valuation profession – a process trade body Revo, of which Robinson is the current president, is keen to encourage.

In March, Nick Knight, executive director and valuation specialist at CBRE, told Real Estate Capital he was disappointed by suggestions that it is valuers’ conflicts of interest that are keeping values high: “You only need to look back to the global financial crisis, when values were written down by 40 percent, to see this is not a community that is afraid of taking values down.”

Also speaking in March, Savills’ head of valuation, Ian Malden, argued that valuing retail involves balancing sentiment and evidence. “Investors are placing less emphasis on yield,” he said. “It is more about the true cashflow and geared returns,” he added.