Activity in the UK shopping center investment market remained strong in 2015, with 86 assets traded totaling £4.30 billion, according to the international real estate advisor Savills. This is approximately 8% higher than the long-term average of £3.98 billion.
The firm highlights the sale of Festival Place, Basingstoke for around £290 million (6.5% net initial yield) and Monument Mall, Newcastle for approx. £80 million (4.75% net initial yield) among the key deals of Q4 2015. Total shopping center transaction volumes for the final quarter were £1.10 billion and there are currently 13 assets under offer plus a further 19 on the market, totaling £1 billion and £1.64 billion, respectively.
Savills also reports that a growing investor preference for higher-quality prime and town-center-dominant centers saw average net initial yields harden to 7.12% in 2015 from 7.65% in 2014. Property companies were the most active investor type last year, acquiring 34 shopping centers for £1.4 billion, compared to 25 centers for £1.03 billion in 2014 (equating to a 36% increase).
By contrast, institutional investors acquired 17 centers for £1.2 billion in 2015, compared to 23 centers for £1.86 billion the previous year (equating to a 26% decrease). Nick Hart, head of UK & European shopping center investment at Savills, comments: “After the general election and economic volatility in the Far East, the second half of 2015 saw a slowdown in investment activity and appetite, which led to only £1.1 billion being traded in the final quarter. We saw the less dominant secondary and tertiary yields moving out by around 100 basis points as a result. With retailers trading profitably, tenant demand continuing to improve, and still-large amounts of global equity for investors to utilize, we expect a more normalized strength and depth of demand for shopping centers across the purchaser spectrum. We are anticipating transaction volumes will reach a healthy £4 billion to £5 billion in 2016.”