One in every five shopping centres in the UK is at risk of defaulting on its loans, according to new research presented by the British Council of Shopping Centres (BCSC). The Secondary Centres research establishes the magnitude of the issues facing shopping centre owners and managers - with an estimated £10.1 bn (EUR 11.6 bn) worth of centres at risk - equating to 43% of all shopping centre transactions in the past five years, BCSC said.

One in every five shopping centres in the UK is at risk of defaulting on its loans, according to new research presented by the British Council of Shopping Centres (BCSC). The Secondary Centres research establishes the magnitude of the issues facing shopping centre owners and managers - with an estimated £10.1 bn (EUR 11.6 bn) worth of centres at risk - equating to 43% of all shopping centre transactions in the past five years, BCSC said.

The research, undertaken by DTZ, reveals the growing polarisation between the performance of prime and secondary retail property, which has been exacerbated by the economic downturn. In spite of recent growth in capital values, the report concludes that collaborative action is required by all stakeholders to prevent secondary centres from falling into further decline.

BCSC's Secondary Centres Taskforce - a group of cross-sector partners from the property, retail and banking sectors - commissioned the research to investigate the extent of the problems facing secondary and tertiary centres, the approaches being adopted to manage these assets and the action needed to facilitate their improved performance. This included face-to-face interviews with a number of banks, property companies, appointed administrators and retailers.

All parties interviewed said that the four main detrimental factors contributing to secondary centres falling into administration or breaching loan payments, are a lack of investment; poor asset management; failure of a number of national retailers; and poor due diligence at the time of purchase.

In spite of these challenges, lenders involved in the research stated that they are taking a pragmatic approach in their willingness to extend credit for capital improvements and working with borrowers to ensure administration is a last resort. However, the establishment of a flexible asset management plan was identified as an important success factor and a key condition of further lending.

Neil Varnham, BCSC president, commented: 'Banks will only fund investments that make economic sense and this will ultimately drive their lending strategy. The role for a good asset manager is crucial to ensure that their investment is being managed effectively, bringing an understanding of retailers and consumers to attract new tenants, drive footfall and sales. There is a role for the retail property industry to play by addressing the perceived skills gap in asset management expertise.'