CBREGI buys UK retail assets

CBRE Global Investors has acquired a further two retail assets in the UK for £18 mln (€21 mln) on behalf of clients, following a £300 mln spree in 2012.

The first asset, a Tesco supermarket in Drayton, Norwich, was acquired for £6.5 mln. The property was recently refurbished and extended before being let on a 20-year lease for a rent of £18 per square foot. The rent will be reviewed every five years.

The second acquisition, for a different client, is the Meadowside Retail Park in Oxford. The property comprises a new retail warehouse scheme and is let on three new 15-year leases to Dunelm Mill, Halfords and Hobbycraft, with an average rent of £17.50 per square foot. CBRE Global Investors paid £11.50 mln.

Over the past year, CBRE Global Investors has invested over £300 mln in UK retail properties on behalf of clients, including a number of other supermarkets as investors sought to lock into long-term, index-linked income. In October last year, the investment manager bought five supermarkets across the UK for a total purchase price of more than £62 mln.

In total, some £1.2 bn of supermarket assets changed hands in the UK last year, according to research provided by IPD, with UK institutions accounting for 90% of all supermarket investment purchases.

'The lacklustre performance of the bond market is driving an increasing number of UK institutional investors, particularly annuity funds, to buy supermarket property investments that can offer the returns and security of income that institutions require,' IPD said.

Acquisitions now reflect net initial yields of around 4.5% but it is the perceived security of income, underpinned by consumer spending, which is of greatest attraction to investors. The average unexpired lease term on a supermarket is over 22 years, compared with just 13 years in the general retail sector.