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UK high street investment transaction volumes increase by 34 per cent

UK high street retail investment transactions, excluding prime Central London, auction and portfolio transaction, reached GBP280m across 73 deals in Q2, according to research from DTZ.

This is a marked 34 per cent increase on the GBP209m traded across 63 deals in Q1 which was the highest Q1 figure since 2010.
Volumes also compare favourably with Q2 2013 showing an 11 per cent increase and demonstrating a continuing positive trend. In addition to completed deals, there are 76 deals with a total expected value of GBP313m (based on quoted prices) that are currently under offer or have exchanged.
This upward trend is being driven by strong positive sentiment in the market and a healthy level of demand from institutional investors. With the volume of deals currently under offer or exchanged and continuing investor demand, transaction volumes are expected to increase as the year progresses.  However, this could be held back in H2 by the limited number of larger, institutional quality assets available.
Due to the weight of money currently in the market and the volume of transactions, yields in Q2 2014 have hardened and continue to trend inward across top regional and provincial towns. With rental growth subdued and unlikely to compensate for yield compression this may result in investors looking further up the risk curve as pricing on good secondary stock becomes more attractive by comparison.
The headline transaction of the quarter was Trinity IM / Starwood Capital’s purchase of Manchester Royal Exchange for GBP45.86m. Other notable transactions included Kingsgate in Crawley, Tavern Street in Ipswich and High Street in Lincoln.
Andrew Inglis, head of high street investment, says: “The high street market is being driven by the significant weight of money chasing stock as investor appetite has improved at both the prime and good secondary end of the market.  However concerns remain whether the supply side will respond.  Yields continue to trend inward on good quality assets and we expect Funds and Private Investors to continue to dominate the market.”
Jonathan Rumsey, head of retail market analysis at DTZ, says: “We continue to see positive economic news and expect this to continue throughout the year. Retail sales are on an upward trajectory with volume growth of 4.7 per cent in May (ONS), led by strong clothing and big ticket item sales. With falling vacancy rates and consumer confidence at the highest reading since March 2005, the health of the UK retail market continues to improve. H1 2014 high street retail investment volumes were 30 per cent up on H1 2013 and we expect this positive momentum to run through to the second half of the year. Increased availability of debt and confidence alongside large cash inflows to funds suggest that the strong pricing witnessed over H1 2014 will persist throughout the remainder of the year.“

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