U.K. retail property specialist Capital Shopping Centres Group PLC (CSCG.LN) Wednesday joined peers in warning that the retail sector is facing a tough year due to weak consumer confidence, but predicted that large out-of-town and city-center shopping malls will continue to perform much better than town high streets.

The real estate investment trust, which owns a portfolio of 14 shopping centers, said it was experiencing rising footfall and continued strong occupancy at its centers and was able to push through rent increases, highlighting continued strong prospects for premium retail centers.

The comments echo those of peer British Land Co. PLC (BLND.LN), which earlier this month highlighted a widening gulf between prime retail properties in out-of-town locations and the continued demise of the traditional British high street.

The trend away from the traditional British high street, with small stores specializing in certain goods, towards huge out-of-town retail parks and superstores is nothing new, having been noted for the past couple of decades. However, the trend is now accelerating as a result of the economic downturn which has pushed many small retailers out of business and compelled others to pare back the number of stores they run. Increasing takeup of online shopping is also putting pressure on high street businesses.

Capital Shopping Centres Chief Executive David Fischel said large shopping centers were continuing to do well because they contain "units of the size and shape (retailers) want."

He said it would be a "big surprise" if there weren't a few retailer failures in this year because of the continued economic weakness in the U.K.

The company's portfolio includes out-of-town centers like the recently-acquired Trafford Centre, Manchester, the Lakeside Centre, Thurrock, and the Metrocentre in Gateshead in the northeast of England. It has nine city-centre centers including Cardiff, Manchester, Newcastle and Nottingham.

Capital Shopping Centres' focus in 2011 will be integrating the Trafford Centre as well as expanding its Thurrock, Breahead and Victoria centres. It also highlighted the expansion plans of retailers including Primark, Next and Apple at some of its centers as a reason for optimism.

Fischel also expects to benefit from the economic downturn because it has halted the development of new large shopping centers, meaning a lack of new competition for the next few years. He said the 1.9 million square foot Westfield Stratford City center being developed by Australian developer Westfield Group Australia (WDC.AU) adjacent to the Olympic Park in East London would be the last center of that size to be built for some years to come.

"The financing market is still difficult in terms of development financing," he said.

Capital Shopping Centres Wednesday reported a 4% rise in net rental income from continuing operations in 2010 to GBP277 million, and it also booked a property revaluation surplus of 11% and a 15% increase in net asset value per share. Its net profit for its continuing operations was GBP428.8 million compared with a pro-forma GBP175.1 million loss a year earlier.

CSC was formed last year when Liberty International demerged. Other property assets of the former company were spun off into a new company, Capital & Counties Properties PLC (CAPC.LN).

Fischel said the company wasn't on the look out for further acquisitions, which he described as opportunistic by nature. He also said the company wasn't looking to sell any assets, believing it had a current strong portfolio.

At 0847 GMT, CSC shares were down 2 pence, or 0.5% at 383 pence, in line with a 0.6% decline in the FTSE 100.

-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284; steve.mcgrath@dowjones.com
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