EU referendum affecting investor sentiment with ongoing market uncertainty - Cushman & Wakefield

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EU referendum affecting investor sentiment with ongoing market uncertainty

9.1 million sq m of European shopping centres to be developed in the next two years
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* 51% of H1 volumes accounted for by just two transactions – Grand Central Birmingham and intu Merry Hill
* There is £808m shopping centre stock currently available or being prepared for marketing
* EU Referendum affected sentiment in H1 with many investors remaining cautious following the ‘Leave’ result as they weigh up the effects on both a macro and micro level

Twenty-seven UK shopping centre transactions totalling £1.46bn either completed or exchanged in the first half of 2016 with the sales of Grand Central Birmingham and intu Merry Hill accounting for 51% of the total volume, according to Cushman & Wakefield.

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

Shopping centre investment volumes in the first half of the year were the lowest H1 volumes since 2012. There is no doubt the EU referendum affected sentiment in the market, with many vendors holding off bringing product to market until after the result. Following the ‘Leave’ result, the uncertainty created will result in investors remaining cautious in the short term.

Cushman & Wakefield expects investment volumes to remain low in the second half as vendors and purchasers alike adjust their strategies. There may be a short-term flight to quality, but the robustness and resilience of the UK market cannot be ignored and some investors may see this as an ideal opportunity to buy into a highly regulated, liquid and transparent market. With volatility obvious across all investment classes, investors should pay particular attention to long term historic rent and yield trends.

One trend that became apparent in the second quarter is the increase in councils purchasing shopping centres. Four shopping centres (Swan Shopping Centre – Leatherhead, The Square – Beeston, Whitefriars – Canterbury, Merseyway Shopping Centre – Stockport) were purchased by councils in Q2 following Teignbridge District Council’s purchase of Newton Abbot’s Market Walk shopping centre in Q1. Councils have the advantage of a low cost of capital through a variety of sources of funding while purchasing also provides them with the opportunity to ensure coordinated control of town centre redevelopment.

Barry O’Donnell, Head of Shopping Centre Investment at Cushman & Wakefield, said: “Investor sentiment has certainly been impacted by the EU referendum. Even with Grand Central and intu Merry Hill bolstering H1 figures, volumes are low. The market is now the most interesting it has been for a while with a divergence of opinions which will create opportunities. Good advice, which is always important, is now critical to make informed decisions given the amount of variables.”

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