Savills is predicting a near-record level of investment in British shopping centres for the final three months of this year. The international real estate advisor claims that the 2015 transaction tally could well match last year’s £6.4bn.
The firm reports that although just £3.05bn has been transacted so far this year — compared to £4.8bn for the same period in 2014 — numbers will rise significantly before Christmas with 23 schemes, worth a total of £1.29bn, already under offer. Savills adds that a further 44 assets, worth £2.17bn, are also on the market.
And it highlights the £171m sale of Angel Central in Islington, the disposal of West One Shopping Centre on Oxford Street for £240m and Eastgate in Inverness, sold for £120m, as being the stand-out deals between July and September. The third quarter saw a total of £1.17bn worth of shopping centre assets transacted across 18 deals.
The firm says that average net initial yields for the sector have hardened from 7.65 per cent in 2014 to 6.97 per cent, reflecting the better quality of stock on the market and continued investor demand for this asset class.
Mark Garmon-Jones, investment director at Savills, explained: “The major transactions of 2015’s third quarter saw extremely strong bidding, demonstrating continued demand for both London assets and dominant regional assets.”
Turning to secondary and tertiary markets, Savills reports that investor appetite for risk is falling and demand is becoming “more sensitive to geographical location, dominance, income profile and asset management opportunities”.
The secondary market in particular has seen a shift from distressed sales — which are still well received by investors — to assets which are well-managed by property companies and private equity houses looking to exit ahead of their business plans, perhaps in some cases having “licked the lollipop dry”.
“Income and its diversity is a massively attractive element of the shopping centre market and those parties which have lower return criteria, the right asset management skills and sensible debt aspirations will come to the fore in the secondary market going forward,” added Garmon-Jones.