It started earlier this week with French-owned shopping mall owner Klepierre pulling out of its bid for UK sector peer Hammerson, and with Hammerson’s share price already down on the back of concern about future income due to the difficult retail environment, it can’t have escaped the notice of bigger institutional shareholders that the risks to UK retail property are starting to become much more of a concern.

Retail businesses are already struggling with higher business rates as well as declining footfall, so today’s news that Hammerson is pulling out of its £3.5bn bid for its rival Intu Properties is quite a sensible move, particularly since some bigger shareholders were expressing disquiet about the deal.

There is also the fact that with retail profit warnings at seven-year highs any deal is likely to be extremely high risk. Why double up on retail property when stores are closing and rental income is under threat? It would be akin to doubling up on a losing position, and as we know from historical precedent that rarely prompts a positive outcome.

The market reaction is also quite telling, with Hammerson shares higher in early trading. It would appear that investors feel the same way, and while Intu shareholders are likely to feel aggrieved, the withdrawal of the bid makes perfect sense in the current difficult retail environment.
 

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