UK shopping centre investment volumes down 39% year-on-year in subdued start to 2016 - Cushman & Wakefield

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UK shopping centre investment volumes down 39% year-on-year in subdued start to 2016

Retail Shopping Centre
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  • Transaction volumes reached £591m in Q1 2016 – down 39% year-on-year – with a further £776m under offer
  • However, £2.7bn shopping centre stock currently available or being prepared for marketing
  • Yields have levelled out with the exception of dominant secondary which moved out 25bps during the quarter
  • EU Referendum and Stamp Duty hike affecting sentiment

Twelve shopping centre transactions totalling £591m either completed or exchanged in Q1 2016 with the sale of Grand Central, Birmingham, accounting for 57% of the total volume, according to Cushman & Wakefield.

UK shopping centre investment transactions value (£bn) by quarter

UK_shopping_centre_investment_transactions

Cushman & Wakefield acted on two of the twelve transactions in Q1 2016, including the sale of Grand Central, Birmingham, on behalf of Birmingham City Council and Network Rail for £335m (3.75% NIY), which was by far the largest transaction in the quarter. Another notable transaction included the purchase of Lion Walk, Colchester, by CBRE Global Investors for a price of £76.5m (6.00% NIY).

A number of large lot sizes are currently under offer including: Broadway Shopping Centre, Bexleyheath, to NewRiver Retail for a price of approximately £122m (6.25% NIY); The Lanes in Carlisle under offer to New Frontier for circa £95m (5.87% NIY); and the funding of St James Centre, Edinburgh, with details of the transaction remaining confidential.

Similarly there are several significant schemes either currently available or being prepared for the market. These include a 50% stake in Intu Merry Hill quoting £440m (5.00% NIY); The Gyle in Edinburgh priced at £195m (5.85% NIY); Ocean Terminal, Edinburgh for £85m (6.49% NIY); a 50% stake in Whitefriars Canterbury seeking £85m (5.65% NIY); and Southside Shopping Centre, Wandsworth, at approximately £300m (c4.25% NIY).

During the course of Q1 2016, dominant secondary shopping centre yields moved outwards by 25bps from 6.00% to 6.25% and are still trending outwards, reflecting more subdued institutional demand. In terms of other sub-sector yields, secondary and tertiary have remained constant but are now trending outwards, while Prime and Super Prime remain stable at 5% and 4.25% respectively, partly reflecting the scarcity of quality product.

Barry O’Donnell, Head of Shopping Centre Investment at Cushman & Wakefield, said: “Sentiment has swung to greater cautiousness given a possible Brexit, a rise in stamp duty and a perception of the UK being more advanced in the cycle than elsewhere. However, more experienced investors would also debate continued historically low interest rates, a volatile stock market and a heightened risk in less mature EMEA markets than the United Kingdom. Government changes to residential buy-to-let taxation will, I believe, lead to greater personal investment in commercial property funds, listed property companies and REITs which will create a wider investment base.”