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Why Trafford Is Getting The Bruntwood Treatment

Bruntwood chief executive Chris Oglesby

Is now the time to call the bottom of the shopping centre investment market?
According to an interview with Bruntwood chief executive Chris Oglesby reported in The Times, shopping centre values have reached their nadir.

The call comes four months after the Manchester-based landlord bought a half share in the £50M Stretford Mall and Altrincham’s 367K SF Stamford Quarter. Its partners are Trafford Council, in whose area both the malls sit.

But a closer look at the Bruntwood story suggests that reviving faith in suburban malls may be only a small part in the expansionist landlord’s calculations.

The market call comes as Bruntwood unveiled its annual results. The family-owned property empire reported a serious dip in profits at Bruntwood Group Ltd from £116M to £52M. The trend is firmly down, represting a fall of 27% since 2017's figure of £71.6M.

"[Profit] was down on the prior year, but ahead of expectations and reflective of the re-risked nature of the group as the percentage of the company’s capital allocated to development was reduced to a third of the level of the previous year, largely as a result of the introduction of Legal & General as a JV partner," Bruntwood said in a statement to the media.

The figures also showed a sharp 16.6% lift in turnover, which topped £160M (up from £137.7M). The total value of the portfolio ticked up by another £100M to £1.4B.

Oglesby’s claim that shopping centre values have bottomed out comes after a good year for Bruntwood's portfolio value but a demoralising one for the owners of shopping centres. The long list of distressed sales and fails includes the collapse of talks to buy the 303K SF Fort Shopping Park Birmingham at half the original 2006 sale price, and a £40M discount on the current asking price.

Tertiary retail is still risky, and Bruntwood’s new enthusiasm for shopping centres needs to be seen in a wider context: a pure retail play it is not.

Stretford, Greater Manchester

The explanation lies in Bruntwood's growth plans. With the opportunities to expand in central Manchester limited by cost and its own massive city centre portfolio, Bruntwood has had to look outside the traditional commercial core. The obvious places to expand are Stockport, Salford and Trafford. Expansion into Stockport is largely blocked by Muse’s office development partnership with Stockport Council and local rival The Emerson Group’s control of most of the buildings Bruntwood might like to buy.

Expansion into Salford is still possible (the University Knowledge Quarter might suit them) but the remaining sites are a long-range prospect in a market already well provided with competitors. Trafford, however, is a different story and Bruntwood has warmly embraced Trafford real estate and Stretford Mall’s co-owner Trafford Council.

At the former Kellogg’s site, Bruntwood is partnering Trafford Council on a 9-acre development to include 750 homes, 200K SF of offices and a hotel.

Next door it is working with Gary Nevilles’ UA92 college campus, also part of the Trafford Council masterplan.

Offices and retail will feature in Altrincham, where Bruntwood inherits plans for 60 apartments and three new retail units of 23K SF, along with 17K SF of new offices. Altrincham is a hot property bet since the rebirth of the town's market as a trendy food venue. In Stretford a £2M facelift was pending, leaving a development site where an original market hall once stood.

Bruntwood also enjoys a commanding presence in the Old Trafford office market, one of the handful of well-established city fringe markets with the potential for growth.

Retail property prices may have ‘hit rock bottom’ as Oglesby told The Times. Abundant financial muscle, local connections and long-term strategy means that if anyone can benefit from a benighted sector, it is probably Bruntwood. Even so, buying two Trafford shopping centres is no simple act of faith in retail. It is better understood as a demonstration of faith in the borough of Trafford.