UK shopping centre deals reach €5.8b in 2015 - Savills

Activity in the UK shopping centre investment market remained strong in 2015 with 86 assets traded totalling £4.30 bn (€5.8 bn), according to real estate advisor Savills.

This is circa 8% higher than the long term average of £3.98 bn.

In its report, Savills highlighted the sale of Festival Place, Basingstoke for £290 mln (6.5% net initial yield) and Monument Mall, Newcastle for circa £80 mln (4.75% net initial yield) among the key deals of Q4 2015. Total shopping centre transaction volumes for the final quarter were £1.1 bn and there are currently 13 assets under offer plus a further 19 in the market, totalling £1 bn and £1.64 bn respectively

In contrast, Cushman & Wakefield was slightly less euphoric in its assessment published earlier this week. In it, C&W said that UK shopping centre investment fell by 32% in 2015 but remained above the 10-year average. C&W estimated the year-end volume at £4.01 bn (€5.45 bn) based on 65 transactions, with a further £1.2 bn worth of stock under offer. Click here for more on the C&W report

Savills
Savills said there was a growing investor preference for higher quality prime and town centre dominant centres. This led to average net initial yields hardening to 7.12% in 2015 from 7.65% in 2014. Property companies were the most active investor type last year, acquiring 34 shopping centres for £1.4 bn compared to 25 centres for £1.03 bn in 2014 (equating to a 36% increase).

By contrast, institutional investors acquired 17 centres for £1.2 bn in 2015 compared to 23 centres for £1.86 bn the previous year (equating to a 26% decrease).

'After the general election and economic volatility in the Far East, the second half of 2015 saw a slow down in investment activity and appetite which led to only £1.1 bn being traded in the final quarter,' said Nick Hart, head of UK & European shopping centre investment at Savills. 'We saw the less dominant secondary and tertiary yields moving out by circa 100 basis points as a result.'

With retailers trading profitably, tenant demand continuing to improve and still large amounts of global equity for investors to utilise, Savills expects a more normalised strength and depth of demand for shopping centres across the purchaser spectrum. 'We are anticipating transaction volumes will reach a healthy £4 bn to £5 bn in 2016,' added Hart.