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Investment in UK shopping centres reaches nine year high

Published:  21 January, 2015

Investment in UK shopping centres has reached its highest level in nearly ten years, according to the latest research by CBRE. 

In 2014, £5.6bn of transactions were completed on UK shopping centres, an increase of 33 per cent on the £4.2bn transacted in 2013 and well above the ten year average of £4bn per annum. Investment activity has not been as high since 2005 when £8.5bn was transacted.

2014 saw some landmark transactions with the largest deal being Land Securities’ £656m purchase of Lendlease’s 30 per cent stake in Bluewater. Lendlease sold its stake to Land Securities with full asset management rights, reflecting an initial yield of 4.10 per cent.

Other notable transactions include the Tiger portfolio of eight shopping centres, bought by Lonestar and Ellandi from Rockspring for £265m with a net initial yield of 7 per cent, and the Swallowtail portfolio of seven centres, the largest part of which was sold to New River Retail for £140m, an 8 per cent initial yield. 

Investor interest in the retail market continued to strengthen in 2014 with the breakdown of investors mirroring that seen in previous years, REITs accounted for 36 per cent of the market across 10 deals with an average lot size of circa £200m. UK and overseas institutions made up 37 per cent of the market in 21 transactions (a smaller average lot size of circa £100m.  With the remaining 27 per cent of the market made up of private equity buyers (15 per cent), property companies (7 per cent) and opportunity funds (5 per cent).

UK buyers were by far the most active, dominating the market by purchasing just over of 70 per cent of stock. Asian Investors accounted for 13 per cent of buyers with North American and European buyers also featuring, 10 per cent and 7 per cent respectively.

Rhodri Davies, head of shopping centre investment at CBRE, said: “2014 has seen strong demand  for shopping centre investment. The improved economic outlook has boosted confidence that the worst of the retail failures are behind us and an increased appetite for space among retailers is likely to drive rental growth. These factors have helped grow the investor pool and volume of money attracted to the sector. We expect 2015 to match, if not surpass, the numbers seen in 2014.”