UK shopping centre investment transactions to date have reached approximately GBP4.1bn and could total up to nearly GBP4.35bn for 2013, according to research from DTZ.
The figure for 2013 to date derives from transactions involving 74 shopping centres. This compares to 29 shopping centre transactions totalling GBP2.5bn in the whole of last year.
With a busy start to 2013, UK shopping centre investment transactions totalled approximately GBP1.36bn in Q1 2013, comprising of 18 shopping centres. Transaction volumes remained steady in Q2 and Q3 2013, with 17 shopping centre transactions in both quarters, totalling circa GBP865m and GBP835m respectively for each. The year is expected to finish though in the same way it began, with transaction volumes already totalling over GBP1.1bn in Q4 2013 in 22 transactions, equating to a sum of around GBP4.1bn to GBP4.35bn for the entire year.
Some of the larger transactions in 2013 include the acquisition of Midsummer Place in Milton Keynes in Q1 for GBP250.5m reflecting a 5.01 per cent net initial yield (NIY), the sale of the Eastgate Centre, Freshney Place and Coopers Square together as part of the Dollar Portfolio in Q1 for GBP246m (8.00 per cent NIY) as well as the Q2 2013 acquisition of a 33.3 per cent stake in The Bullring, Birmingham for GBP307m (5.43 per cent NIY). Similarly the purchase of the Britannica Fund, a portfolio of seven shopping centres for GBP250m (9.00 per cent NIY) in Q2 and the Q3 2013 acquisition of the St Enoch Centre in Glasgow for GBP190m (7.22 per cent NIY) have ensured UK shopping centre transaction volumes for 2013 exceed the 2012 total and the five-year average.
Twenty two shopping centres totalling GBP1.1bn have transacted so far in Q4 2013 while a further 17 centres totalling approximately GBP1.1bn are under offer, although little time to get these deals unconditionally over the line before year end they should begin 2014 with a bang. Another 20 centres – GBP1.75bn – are already being marketed or being prepared for market, suggesting a lively start to 2014.
The standout asset transaction so far in the fourth quarter is Invesco’s purchase of Queensgate Centre in Peterborough from Hammerson and Aviva. The price paid is GBP202m reflecting 6.2 per cent NIY. DTZ advised the buyer.
Another noteworthy Q4 deal is the purchase of Bon Accord & St Nicholas in Aberdeen by F&C REIT for a reported price of GBP189m reflecting a 6.95 per cent net initial yield (NIY).
Other notable dominant secondary assets to transact this quarter, include Redefine’s purchase of Weston Favell Shopping Centre in Northampton for GBP84m (7.20 per cent NIY) and Market Place in Bolton sold to Moorgarth for GBP24m, reflecting a 7.75 per cent NIY.
Meanwhile, several high profile deals have gone under offer in Q4, including the sale of a 50 per cent stake in Cabot Circus in Bristol for GBP270m (6.25 per cent NIY), and a 50 per cent stake in the TheCentre:MK in Milton Keynes which is under offer to mandate of Henderson). Furthermore the sale of the Royal Exchange in London is believed to be under offer to Oxford Properties for GBP83.5m (4.50 per cent NIY).
Yields for prime, secondary and tertiary shopping centres have remained stable so far in Q4 but trending remains inward. ‘Super prime’ shopping centres continues to trend at 5.00 per cent/5.25 per cent, reflecting strong sentiment from global investors, whilst ‘prime’ shopping centre yields remain at 5.50 per cent / 6.00 per cent and dominant secondary shopping centres continue to transact at 7.25 per cent/8.00 per cent due to the level of interest and pricing achieved for recent transactions.
Barry O’Donnell, head of shopping centre investment, says: “As we saw at the start of the year, the shopping centre investment market is ending the year strongly. At least GBP4.1bn of assets will have exchanged by the end of the year compared to last year’s GBP2.5bn. There has been an emergence of new global entrants into the market targeting prime assets while UK retail funds are now focusing on the secondary market, albeit selectively. This will carry on into the New Year and we expect to see yields continue to harden. With only a couple more deals to exchange before Christmas, Q1 2014 promises to be a busy period, similar to Q1 2013. We are delighted to have acquired Queensgate centre in Peterborough which is the standout deal of the quarter.”
Jonathan Rumsey, head of retail market analysis at DTZ, says: “The UK economy has seen a substantial improvement since the middle of the year and is forecast to grow 2.4 per cent in 2014. The retail market, although still vulnerable to changing consumer trends, has seen improving consumer confidence which should carry on into the New Year and we expect the improving housing market to help non-food retailers in the home ware and furniture market. In respect to shopping centre investment volumes, with new global entrants forcing UK retail funds to target secondary stock, we expect this segment of the market to outperform prime next year.”