Demand drives up shopping centre values

Photo: Martinrp

High demand is driving up shopping centre values, with out-of-town centres racing ahead of those in town.

The UK’s out-of-town shopping centres saw their value soar by 6 per cent in Q3, according to CBRE, marking the second steepest increase since 2000.

Their capital appreciation dwarfed the 3.8 per cent growth in values for in-town shopping centres, echoing a growing demand for large, dominant destinations.

Rents also grew strongly in these out-of-town shopping centres, rising 2.1 per cent, but even this growth wasn’t enough to keep pace with growing property values. As a result, yields were pushed down to 4.5 per cent, their lowest level since 2000, making these sites increasingly attractive for investors looking to lower their exposure to risk.

Natasha Patel, Associate Director at CBRE Research said: “On the whole, we saw fairly modest capital value growth in Q3, but both rents and capital values in out-of-town shopping centres have grown remarkably. This rental growth is largely due to continued demand from retailers who are placing greater emphasis on dominant centres to strengthen their brand presence.”

Elevated by these out-of-town figures, the overall shopping centre sector saw capital value growth of 4.5 per cent and rental growth of 1.6 per cent, the highest across all prime commercial property sectors, which averaged 2.2 per cent and 1.1 per cent respectively. The popularity of shopping centres appears to have come at the expense of high street shops as property values in the rest of the retail sector have grown by just 2.2 per cent, a figure buoyed by strong capital value growth in Central London of 5.5 per cent.