While last year saw record numbers of investors express an interest in the UK’s shopping centre market, this enthusiasm has dampened somewhat during 2015.
However, according to a new report released today by Cushman & Wakefield, the final quarter of the year will see investment volumes rebound impressively, ushering 2016 in in fine form.
The firm’s Shopping Centre Development Report points out that investment volumes for the first three quarters of 2015 are expected to reach around £2.78 billion which, while still an impressive level considering the country has recently emerged from the longest recession in several decades, fails to measure up to the £4.33 billion total recorded during the same period in 2014.
Analysts at Cushman & Wakefield theorise that this lag may be due to the timing of the General Election in May, which caused a degree of delay in a number of deals being marketed.
Fortunately, though, the report goes on to reveal that, as we prepare to enter the final quarter of 2015, there is approximately £3.16 billion of shopping centre stock either under offer or available for purchase on the UK market.
Cushman & Wakefield believes that this will cause an “end of year surge”, particularly as interest from international investors and domestic property funds continues to creep ever upwards.
Head of EMEA Retail, Justin Taylor, believes that the shopping centre market is currently entering a period of change from the trends seen in recent years.
He says; “The real estate market has been going through a period of yield shift which has delivered some excellent returns for strategic investors in shopping centres.
“The next few years look likely to be more about income growth than yield movement so the value of a good asset manager could be considerable.”
The Shopping Centre Development Report also showed that new space creation within the shopping centre market remains relatively high, with approximately 2 million square feet due to be completed by the end of the year. Although this is slightly below the five year average of 2.2 million square feet, it is a 24 per cent increase on the 1.6 million square feet delivered in 2014, and includes highly anticipated projects such as the Grand Central scheme in Birmingham.
Looking ahead to 2016, completed space is expected to drop slightly but remain steady at around 1.8 million square feet, with six new schemes and four extension projects in the pipeline. However, this may rise slightly as the final quarter of this year progresses, particularly if current consumer trends remain in place during the run-up to Christmas.
Finally, 2017 is likely to see a rather subdued development pipeline, with only three schemes and one extension project totalling 1.1 million feet presently planned. This is largely due to viability challenges and a number of projects being deferred.
Mr Taylor continues; “Landlords are now looking to maximise their existing assets with an increasing number of extensions, as well as hitting the refurbishment button once again.
“Indeed, it is becoming increasingly clear that those shopping centres that offer convenient, well located establishments providing a ‘destination’ appeal – complete with leisure components and all a shopper could need under one roof – are the winners of the future.”
Do you think investment will continue to rise if yield growth slows?
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