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Shopping centre investment slows
Published:  26 April, 2012

Savills reports a slow start to the shopping centre investment market in 2012

Just 12 shopping centre deals have been completed in the first quarter of 2012, with a combined value of £461.55m compared with 17 deals worth £609m in the previous quarter. And the average initial yield in Q1 2012 was higher than Q4 2011 at 8.3 per cent up from 7.95 per cent reflecting market sentiment and nature of the secondary stock being traded.

Notable transactions in Q1 2012 included Resolution’s £90m purchase of Ocean Terminal, Edinburgh reflecting a 7.5 per cent initial yield and an 8 per cent equivalent yield. Marriott’s Close in Witney sold to RREEF for £29m reflecting a 5.8 per cent initial yield and a 6 per cent equivalent yield. And the St Johns shopping centre in Liverpool sold to Infrared for £76.5m reflecting an 8.75 per cent initial yield and an 8.5 per cent equivalent yield.

Currently, 12 shopping centres worth £690m are under offer with another 17 shopping centres worth £905m on the market.

Savills believes that 2012 will be the polar opposite to 2011. The first six months of the year will be dominated by uncertainty, a lack of quality stock and limited trading volumes. The firm expects the second half of 2012 to see greater activity with an increase in volume of quality stock coming to the market both direct and via stakes in major shopping centres.

There remains a large number of equity buyers at present albeit with a focus on Greater London, the South East and major city centres. The right assets, in the right locations depicting strong fundamentals are being very competitively fought over and in many cases at near pre-recession yield levels.

But in its latest bulletin Savills warns of over-inflated pricing expectations from vendors, whether banks or investors, based upon historic valuations. Super Prime and Prime yields have remained resilient whilst Secondary and Tertiary continue to come under pressure. The disparity is now up to a 900 basis points.