Shopping Centre

Shopping centre values lagging behind, warns C&W

Published:  12 January, 2010

Commercial property yields strengthened in December 2009 for the ninth successive month, although the fall was the smallest since July as signs emerged that market pricing was starting to stabilise.

Cushman & Wakefield noted that in December vendors were more willing to take advantage of better demand and pricing – some of whom were selling stock only purchased earlier in 2009. But it forecast that the outlook for the early months of 2010 is for yields to move down, albeit with a slowing pace of compression, as seen in December.

The retail market saw the strongest yield compression in December, with an average fall of 20bp, beating the industrial market at 17bp and offices at 3bp. The recovery since the high point for yields has been the strongest for retail warehouses followed by industrial, shops and then national offices. However shopping centres values are lagging behind. They were the most adversely of all sectors and yields still stand 225bp higher than their 2007 low, against an average for the whole commercial property market of 167bp.

David Hutchings, head of research at Cushman & Wakefield said: “Investors are becoming less risk-averse as they seek out investment opportunities but most are still chasing prime, well-let assets and, to date, the correction is still a return to fair value rather the start of a new asset price bubble.”

And David Erwin, C&W’s CEO of UK Capital Markets said: “All eyes may be on retailer results in the next four to six weeks as a bellwether for the economy, but it is the banks we should be watching more since they will shape the outlook for investment activity to a large extent. Signs of better financing conditions are set to help the market but the scale of refinancing needs provides both a real threat to the recovery as well as a major source of opportunity for astute investors.”