Q3 2014 saw UK Shopping Centre Investment turnover up 29% on Q3 2013, rising from £1.2 billion to £1.6 billion; this was in 38 deals. The average initial yield in Q3 was 7.88% compared to 8.39% in Q3 2013.

Notable transactions in Q3 2014 included:

■ The acquisition by Orion Capital of East Kilbride Shopping Centre, Glasgow for £178 million from Delancey and RBS, reflecting an initial yield of 6.7%. Savills acted on behalf of the vendor.

■ The acquisition by Standard Life of Palace Exchange, Enfield for c. £74 million, reflecting a 5.25% initial yield. This formed part of Project Swallowtail, which contained seven shopping centres and Fosse Retail Park, Leicester. Savills acted on behalf of the vendor.

■ The acquisition of Cabot Circus, Bristol by Axa Real Estate Investment Managers and Gingko Tree also completed in Q3 2014 for £270 million, reflecting an initial yield of 6.20%.

■ The acquisition by Cerberus and Edinburgh House Estates of the Glanmore Portfolio of six shopping centre assets located across the UK for £80 million, reflecting an overall initial yield of 8.9%. Savills advised the purchaser.

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Currently there are c. £1 billion of deals under offer, a further £1.18 billion in the market and another £500 million is likely to come to the market, in the short term (before the end of Q1 2015).

Q4 2014 has seen intense activity in the shopping centre market with increased investor activity and demand for the sector from all quarters; private equity, property companies, opportunity funds, institutions and sovereign wealth funds. At this stage in the year we estimate that total transaction volumes for the year will exceed £6.5 billion, significantly above the long-term average of £3.8 billion.

The notable increase in activity from the institutional investors is largely driven by the continued increase in cash inflows and the sheer weight of money. We continue to see a significant number of new entrants coming into the market backed up by the increased supply and quality of the stock and the improved terms and availability of debt.

Increased retailer confidence is supporting the frenzy of activity in the sector, with a reduced number of administrations occurring, improving trading patterns, and rising consumer confidence. The improvement in retailer performance is starting to reduce vacancy rates in shopping centres and, furthermore, the spectre of rental growth is starting to be discussed in more than whispers!

We are seeing a reduction in the yield gap between prime, secondary and tertiary and town centre dominant secondary schemes with good income profiles are attracting excellent levels of demand.

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The trend of shopping centres coming to the market as high profile portfolio sales has continued, most notably in Project Swallowtail, which attracted unprecedented levels of interest over the summer months; and Projects Tiger and Carbon, both of which have recently come to the market.

The one area of the market that continues to draw the least market demand is those assets with short weighted average unexpired terms and where there is significant competition in the immediate vicinity.

Taken from
UK Shopping Centre and High Street Bulletin Q3 2014