Savills - Retail Other - UK
Date: 30 Jul 2008
Savills' quarterly shopping centre and high street bulletin has revealed a significant fall in shopping centres transacted in H1 2008 compared with the same period in 2007.
It notes that shopping centre deals in the first half of the year totalled £871 million, compared to a total of £2.8 billion in 2007, representing a £1.93 billion decrease between H1 2007 and 2008. However, Q2 2008 has witnessed an increase in volumes transacted from Q1 2008 with the total value of shopping centres transacted totalling £567 million, which reflects a £260 million increase on Q1. The report also states that the average shopping centre deal value has increased by £66.83 million since the previous quarter.
Savills' bulletin, commenting on Q2 2008, reports that this period saw eight shopping centres traded in six deals including Peacocks Shopping Centre in Woking, The Mall Fund centres (in Chester, Epsom and Edgware) and Lion Walk in Colchester. The report also identifies that the average initial yield for Q2 2008 has fallen to 6.04% from 6.15% in Q1, perhaps reflecting the higher quality of assets traded.
Nick Hart, director of Savills, comments: "A number of investors still have equity available to spend, but they will only do so when values fall. The standoff that we have seen over the first half of 2008 between vendors and purchasers continues and banks still require higher margins and arrangement fees and lower loan to values. The fact that these deals have taken place is however a positive sign that the market is beginning to regain liquidity."
According to Savills, Q2 2008 has witnessed an absence of overseas investors in the market place. The most dominant group of purchasers were identified to be property companies, who acquired 67% of stock, with private Irish investors accounting for 20%. The number of investors looking to purchase remains high, but the report suggests transactional activity will remain muted until the cost of debt falls and the market corrects further. Limited stock has come to the market in H1 2008 and shopping centres are on the market have not yet sold (for example The Bullring in Birmingham, The Grosvenor Centre in Macclesfield and Liffey Valley in Dublin).
In terms of high street investment Savills reports that retail funds have largely stopped selling. It suggests that the majority of properties being offered are proving unpopular in the market due to the inferiority of the product and unfavourable prices. However the report states there are isolated examples of investor enthusiasm with some transactions achieving initial yields of below 5%. This identifies that in the current market cash rich investors are investing in quality assets and building up strong portfolios.
Jeremy Lovell, director of Savills, adds: "The fact that we are still seeing strong levels of interest demonstrates that investors are still very much out there, but they are being more selective and are keen to obtain good value for prime retail investments."
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