UK shopping centre investment volumes could fall to 2012 levels, but buyers still circling - Savills

13 July 2016

International real estate advisor Savills has forecast that UK shopping centre investment volumes are likely to total circa £2.5 billion in 2016 compared to a long term average of £4 billion, but strong fundamentals and appetite from opportunistic investors will see the market remain resilient.  

The firm’s latest UK Shopping Centre and High Street Bulletin reports that, at £737.2 million, Q2 shopping centre transaction volumes were on par with the Q1 total of £770 million but 29% down on the £1bn seen in Q2 2015.  Additionally, transaction volumes for the first half of 2016 are 20% down on the same period last year at £1.508 billion compared to £1.881 billion.   Figures for the year to date have been boosted by several large transactions including the £410 million sale of a 50% stake in intu Merry Hill, Dudley; the £335 million sale of Grand Central, Birmingham and the £300 million sale of a 35% stake in Liverpool One. 

Nick Hart, head of UK & European shopping centre investment, comments: “There were around 40 to 50 centres being prepared for sale before the EU referendum, but following the leave vote we expect very little quality stock to become available unless there is a ‘need to sell’.  However, we are aware of significant overseas and opportunistic equity pots waiting to enter the market.  The vast majority believe in the fundamentals of UK property but want to acquire assets across the spectrum at a discount to previous values and it remains to be seen whether this movement will happen.”

High street investment volumes were more resilient in H1 2016 with transactions worth £1 billion completing in London and a further £600 million elsewhere in the UK.  Ben Tyack, high street investment director at Savills, comments: “As many UK institutions were inactive in the run up to the referendum, the volume of transactions involving larger high street lot sizes was considerably lower than last year.  Looking ahead to 2017, we expect smaller lot sizes to remain more liquid than those towards the larger end of the spectrum and a softening of secondary yields back to 8% plus which will enable opportunistic buying for some.”

Across both shopping centres and high street shops, Savills does not expect occupational demand to react quickly to the referendum result although the value of the pound and how this feeds through into the costs of purchasing products and shop fitting will be a hot topic among retailers for the remainder of the year.  Supply will remain tight and competition for units of all sizes on good pitches will continue to support rents although landlords are likely to take a more flexible approach during this period of uncertainty, says Savills.

Mat Oakley, head of commercial research at Savills, adds: “Unlike a more normal economic shock, this is one people voted for and the inevitable slowdown in consumer spending may therefore be more modest than some forecasters are predicting.  For retailers and investors alike, all eyes are going to be on consumer confidence in the run up to the festive season and then on Christmas trading figures as they are reported in early 2017.  Once those figures have been fully digested the direction for the occupational market as well as both investment pricing and trading volumes in 2017 will become more clear.”

Click here to view the UK Shopping Centre and High Street Bulletin

 
 

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Key Contacts

Nick Hart

Nick Hart

Director
UK Investment

Savills Margaret Street

+44 (0) 20 7409 8837

 

Ben Tyack

Ben Tyack

Director
UK Investment

Savills Margaret Street

+44 (0) 20 7409 8084