Shopping Centre investment hits pre-recession Volumes

Posted on 30 January, 2015 by Kirsten Kennedy

Shopping centre transactions during 2014 reached volumes not seen since prior to the recession, DTZ reports.

Motion Blurred People in the Shopping Mall

Last year, investment transactions in the UK reached £5.83 billion, with 101 shopping centres bought or sold in 70 separate transactions. According to DTZ, this is higher than both the 2006 total of £5.62 billion and the 10 year average, which currently stands at £4.16 billion.

Although the growth started relatively slowly, with only 13 transactions worth £1.31 billion in the first quarter, it climbed steadily throughout the year with the second quarter seeing £1.43 billion worth of transactions across 18 schemes. This grew further in the third quarter, reaching £1.59 billion for 30 different centres, before the fourth quarter concluded the year strongly with 40 schemes purchased in deals totalling £1.50 billion.

This trend echoes the year on year growth seen in the sector, as in 2012 investment transactions managed to reach just £2.49 billion through 27 different deals. By the end of 2013 this climbed to 64 transactions totalling £4.45 billion, with last year’s total a further positive step towards market fluidity.

Head of retail market analysis at DTZ, Jonathan Rumsey, believes that the number of retailers seeking expansion as a result of the more favourable market conditions played a significant role in this growth.

He says; “According to ONS figures, the volume of retail sales increased 6.4 per cent in November year on year, the 20th month of consecutive year on year growth.

“This is the highest increase since May 2004 and was led by department stores and household goods stores – retailers are still getting to grips with their omni-channel strategies, realising the importance a store plays with the ever increasing click and collect channel and helping to fuel occupier demand.

“In 2014 we witnessed a significant year in shopping centre investment volumes with the £5.83 billion transacted trumping the 2013 figure of £4.45 billion.”

Furthermore, DTZ expects this growth to continue in 2015 as, by the time 2014 drew to a close, 17 shopping centres were under offer for a total value of £1.12 billion. Additionally, 26 shopping centres were placed on the market late in year or in the early stages of 2015, adding £742 million to the total transaction value.

It is highly likely that at least a percentage of these assets will be snapped up by Asian investors, as during 2014 Asian investment represented 17 per cent, or £970 million, of total market share. This represents a steep growth curve, as in 2013 Asian investors’ market share in the shopping centre transaction market were at 0 per cent.

Head of shopping centre and outlet investment at DTZ, Barry O’Donnell, concludes; “Demand will outstrip supply in 2015 particularly for quality assets.

“With the return of UK institutions into the market and better leverage opportunities, we anticipate an active year ahead.”

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