UK Shopping Centre Investment Volumes Remain Robust

23 May, 2011, London

The UK shopping centre investment market had a strong start to the year and saw a continuation of the significant activity seen in Q4 2010, according to global property consultant Cushman & Wakefield. In Q1 2011 a total of 13 shopping centre investment transactions took place with a turnover of £2,069m, slightly down from the previous quarter in which activity matched that of the buoyant market of five years ago. Shopping centres under offer in Q1 2011 totalled £579m.

The quarter has been dominated by CSC completing its acquisition of The Trafford Centre at £1.6bn. The purchase reflected a net initial yield of 5.00% and an equivalent yield of approximately 5.55%. Another notable deal is Hammerson’s acquisition of four shopping centres from St Martin’s totalling around £160m (Croydon, Lichfield, Newcastle and Coventry). Other, smaller transactions in Q1 2011 include: British Land’s acquisition of Green Lanes, Barnstable for £30.3m; Helical’s acquisition of Sutton in Ashfield for £16.5m; Sovereign/AREA’s purchase of Ayr for £33.8m; and KFI’s acquisition of Princes Mead, Farnborough for £26.3m.

As relatively few centres have been openly marketed throughout the first quarter of 2011, a number of shopping centre requirements for prime schemes remain outstanding. Investment demand remains strong with the REITs and the UK institutions seeking prime stock and the property companies pursuing schemes with a higher yield.

Charlie Barke, head of shopping centre investment at Cushman & Wakefield said: "Looking ahead, it appears there will be short term downward pressure on prime yields as demand continues to outweigh supply. Secondary yields appear stable at present, though a significant increase to investment supply could leave these yields vulnerable. We do anticipate seeing an increase in the amount of stock on the market over the next quarter, principally bank-led sales.”

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