New analysis from global property advisor Knight Frank shows investment in UK shopping centers has increased 169% year-on-year as domestic and overseas investors capitalise on attractive pricing of assets and anticipate a return to pre-COVID shopping habits.
Knight Frank’s H1 2022 Retail Investment report shows that shopping center investment volumes totalled 1.47 bn Euro in the first half of 2022, up from 546 million Euro in the same period in 2021, with total investment for the year set to return to the 10-year average.
According to the analysis, investor demand has been focused on smaller in-town shopping centers, as well as a handful of larger ‘destination’ malls, including the 142 million Euro combined purchase of Victoria Gate and Victoria Quarter in Leeds by Switzerland-based Redical Capital. A number of larger assets are expected to come to market in the second half of the year.
Activity in the first half has been driven by overseas and private equity investors, alongside institutional investment into the outlet sector. The demand has seen yields tighten for the first time since 2015, with larger regional shopping centers now trading at 7.5%, down from 8% in 2021, and local centers trading at 9%, compared with 10% last year. The first half has seen over 3.7 bn Euro invested in retail property in total, with strong competition continuing for retail warehousing.
Will Lund, Partner, Retail Capital Markets, Knight Frank, said: “After years of falling valuations we are seeing a shift in investor sentiment and shopping centers starting to come back into fashion. There was an artificial spike in ecommerce during the pandemic but spending habits are now normalising. With pricing and rents now stabilising investors are beginning to see the long-term appeal and resilience of shopping centres as a key part of modern multichannel retail. We expect a number of regional centres to come to market in the second half which will test demand for larger lot sizes.”
“It is not just shopping centers that are more in-demand, we are currently seeing strong appetite for most types of retail property, despite the economic headwinds”. added Sam Waterworth, Partner, Retail Capital Markets, Knight Frank. Competition for retail warehousing, which has outperformed almost any other property asset class in the past year, is fierce and we are seeing more liquidity in high street retail, particularly in the South East. After surviving the challenges posed by the pandemic there is renewed confidence that retail will endure the market turbulence expected in H2 2022 and provide attractive returns going forwards.”