UK shopping centre investment transactions in 2014 totalled £5.83bn (101 shopping centres comprising 70 transactions) according to DTZ. These volumes have not been witnessed since pre-recession times when in 2006 volumes reached £5.62bn. The 10 year average in terms of shopping centre volumes is £4.16bn.
Transaction volumes have increased significantly in the last three years with 27 shopping centre transactions in 2012 totalling £2.49bn, compared with 64 transactions in 2013 at £4.45bn and considerably more in 2014 with 70 transactions totalling £5.83bn.
The £5.83bn transaction volume (101 shopping centres) for UK Shopping Centre investment in 2014 comprised 13 shopping centres transacting (£1.31bn) in Q1 2014, with 18 schemes (1.43bn) acquired in Q2 2014 followed by 30 shopping centres (£1.59bn) in Q3 2014 and lastly 40 schemes (£1.50bn) were purchased in Q4 2014.
The main transactions in Q4 2014 were the Tiger Portfolio to Lone Star & Ellandi for £265m and Land Securities‘ sale of The Centre, Livingston to Hines/HSBC for £224m.
Seventeen shopping centres were under offer at the end of Q4 2014, totalling £1.12bn including Telford Shopping Centre at £200m and the 50% stake in the Bentall Centre, Kingston-upon-Thames which is under offer for £200m signalling that 2015 will kick off with a very strong start. There are 26 shopping centres being openly marketed totalling £742m and DTZ expect 2015 to maintain these transaction volumes.
It has been a year fuelled by the weight of money targeting the sector. Asian investment represented 17% (£970m) of total market share in 2014, previously unseen in 2013 at 0%. Shopping Centre deals purchased with Asian money in 2014 included Cabot Circus in Bristol, Intu Uxbridge, Hammersmith & Fulham Broadway and The Centre in Livingston.
Frustrated capital exerted much pressure on yields throughout 2014. Super prime yields are currently at 4.50% having moved in from 5.00%-5.25% in December 2013, although DTZ see super prime to now be trending as stable. Prime yields came in over 2014 from 5.50%-6.00% to 5.25% and are trending inward.
There is arguably stronger demand in the market for secondary product where investors see most value. Investors have moved up the risk curve which resulted in pressure on dominant secondary yields moving from 7.25% – 8.00% over 2014 to 6.50%/6.75%, whilst secondary yields moved from 8.75%-9.75% to 7.75%/8.25%-. The biggest shift in yields came from the tertiary end of the market where yields moved over 200bps from 11.00% to 8.75%-. All secondary and tertiary yield categories are trending inwards. Barry O‘Donnell, DTZ Head of Shopping Centre and Outlet Investment, said:
“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.”
Jonathan Rumsey, Head of Retail Market Analysis at DTZ, also commented:
“According to ONS figures, the volume of retail sales increased 6.4% 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 £5.83bn transacted trumping the 2013 figure of £4.45bn.”