Shopping centre investment to cool following Brexit vote

Shopping centre investment is forecast to cool down in the second half of 2016, following the UK’s EU referendum.

“There is no doubt investor sentiment was affected in the lead up to and following the EU referendum,” says Cushman & Wakefield’s latest report, “with many vendors holding off bringing product to market until after the result.”

“We expect investment volumes to remain low in H2 as vendors and purchasers alike adjust their strategies,” adds the study, although the uncertainty-fuelled caution is expected to be short-term, rather than long-term.

Indeed, sentiment surrounding consumer confidence and retail sales remains broadly positive.

“Following the vote to leave the EU, there was an immediate fall in consumer confidence,” says Justin Taylor, Leasing Agency – Retail. “However, the drop went only marginally below the long term average and has since recovered some of the lost ground. The official retail sales figures released for July revealed that not only did sales hold up, they actually increased 5.4 per cent year-on-year. ”

Retail Sales, meanwhile, are forecast to stay positive in the next five years, albeit just below the long-term average, with economic forecasts not indicating a UK recession.

Across the first half of 2016, shopping centre vacancy rates have improved across nearly all GB regions. Although retail sales have shown 39 months of consecutive monthly year-on-year growth, footfall is declining across the high street and shopping centre market, which Cushman interprets as signs of “a change in trends from fewer but higher spending visits”.

385,847 sq m of additional shopping centre floor space is under construction and expected to open in the next 19 months.

Overseas investment in UK shopping centres soars

6th April 2016

Bentall Centre, Kingston-upon-Thames Photo: Elyob

Overseas investment in UK shopping centres has quadrupled in the last year.

According to EGi figures, investment in shopping centres in the UK hit £3.8 million in 2015. While domestic investors accounted for the majority of the capital (£2.5 billion), international interest in the UK’s retail property market is on the up: more than a fifth of the total invested last year come from overseas, with international investment soaring more than 200 per cent to hit £864 million.

London accounted for the lion’s share of the funds, with Ginko Tree Investment purchasing Kingston-upon-Thames’ Bentall Centre for £190 million, although deals also took place in the North West and Scotland.

European buyers made up the majority of activity, with 56 per cent of all deals (£487 million), but Asian buyers were the second most active, spending £190 million, ahead of North Americans (£187 million).

Nonetheless, international investment has some way to go until it returns to its peak of £1 billion, which was recorded in 2012.

Shopping centre investment to hit £6.5bn

17th July 2015

The firm’s latest report highlights a strong first half of 2015, with £1.634 billion transacted across 32 deals. The second half of the year is predicted to be even stronger, though, with 28 shopping centres under offer worth around £1.25 billion, 48 in the market worth around £2.24 billion and 18 being prepared for sale worth  around £750 million.

Savills predicts that these transactions could take volumes to £6.5 million by the end of December 2015, up from £6.44 billion in 2014.

The firm also states that average net initial yields have fallen from 8.02 per ecnt to 7.21 per cent year-on-year, reflecting increased demand and the popularity of the sector with investors.

Nick Hart, head of UK and European shopping centre investment at Savills, comments: “There are a number of significant disposals coming through such as Dundrum Shopping Centre in Dublin, Festival Place in Basingstoke and a stake in Birmingham’s Merry Hill which we believe will see transaction volumes rise to 2006 levels before the end of this year.”

Additionally, Savills highlights increasing investor recognition of the premium value of shopping centres in London with extremely strong bidding as a result.  In Q2 2015, the perceived rental growth and development potential at Kings Mall in Hammersmith saw competitive bidding to 4.25 per cent net initial yield. This is also apparent at  the Angel Centre in Islington (formerly The N1 Centre) which is under offer at £34m over asking terms to clients of CBRE Global Investors, reflecting a net initial yield of 3.9 per cent.

Hart adds: “London’s premium value is especially apparent where there are refurbishment or redevelopment opportunities available. The same is not true of secondary shopping centres, with many remaining on the market due to unrealistic pricing expectations, poor trade or geographical location and weak expiry profiles.”