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Centre investors ‘will have to work harder’

Published:  01 April, 2005

Investors in shopping centres will have to work harder if they are to deliver the returns to which they have become accustomed, according to Donaldsons.

Sound asset management plans are essential if the current total returns from shopping centres – standing at 21 per cent, their highest for 17 years – are to be maintained, said the firm in its Retail Spotlight bulletin.

For most of last year, the sheer weight of money flooding into the market applied pressure to initial yields – typically achieving around six to 6.5 per cent.

As total returns begin to slow, there will be less scope for further yield drops and asset management skills will be tested.

Head of retail Bryan Duncan said: “As the shopping centre market changes, investors will be required to adopt a more innovative approach to secure best returns.”

Investors are likely to look at alternative options in the face of low returns and a shortage of suitable stock.

Some investors are already looking towards continental Europe for their acquisitions – an option made more attractive by the opportunities offered by some EU accession states.

Poland and the Czech Republic are particularly promising due to the relative sophistication of their retail markets and abundance of modern schemes, said Donaldsons.