UK/EUROPE - Investors are still confident in the UK shopping centre market despite a sharp drop in transaction values in the second half of 2007, according to a DTZ report.
There was a 9.7% first-half increase in the value of transactions over the same period in 2006, although this then fell 34% to £5.67bn in the second half. However, a small number of large transactions - including GIC's £426m acquisition of a 40% share in Newcastle's Metro centre - skewed the average lot size to a record £89m, compared with £70m in 2006.
According to the annual Shopping Centre Review, "these transactions represent investors continued confidence in the prime market".
Over the year, transaction volumes almost halved to 42 from 81 the previous year. Yet the report's authors approvingly note there was a yield correction to "more sustainable levels" and a widening gap between prime and secondary assets in the second half.
Last year likewise saw a change in the profile of shopping centre property investors, as overseas investors replaced the unit funds previously active in the sector. Property firms last year sold off assets and the "squeeze on debt provision strengthened the position of funds in the market with large amounts of cash".
DTZ has also forecasted further attrition among investors, noting "as Warren Buffet said, ‘It is only when the tide goes out that you can see who has been swimming without their trunks on'."
However, the real estate firm remains optimistic about the prospects for the sector and with investors likely to "view how the market moves" for the first two quarters of 2008, the report's authors forecast "competition will remain healthy for assets in prime locations or those with growth potential".
They added: "Moving into 2008, the schemes currently ‘under offer' or exchanged are worth a total of £1.27bn, giving assurance of the confidence in shopping centres as secure assets."