Investors keep up the pace of deals

Published:  04 April, 2014

UK shopping centre investment transactions totalled £1.31bn in Q1 2014

UK shopping centre investment transactions totalled approximately £1.31bn; comprising 13 shopping centres during the first quarter of 2014, according to new research from DTZ.

The total value for Q1 2014 represents a similar transaction value to Q4 2013 which totalled £1.39bn, however Q1 2014 comprised only half the number of shopping centres. The first quarter of 2014 also compared very similarly to Q1 2013 where transactions volumes equalled £1.37bn comprising 11 shopping centres.

At the end of Q1 there were only 11 shopping centres being openly marketed totalling approximately £538m, highlighting that very little stock is currently available. Ten shopping centres were under offer totalling circa £1bn.

The headline transaction for 2014 was intu’s purchase of a 50 per cent stake in Westfield Merry Hill and the 100 per cent purchase of Westfield Derby. The Merry Hill deal reflected a net initial yield of 5.21 per cent and Westfield Derby 6.89 per cent. Trinity Walk in Wakefield was sold to Orion Capital Managers for £160m, reflecting a net initial yield of 6.25 per cent.

Prime centres under offer in Q1 include Intu Uxbridge, reportedly under offer to KWAP for £215m reflecting a net initial yield of 5.50 per cent. Also under offer is a 50 per cent stake in Cabot Circus, Bristol to AXA and a Far Eastern investor for a reported £270m, which reflects a 6.25 per cent net initial yield. And Orion Capital Management is understood to have placed under offer a 50 per cent stake in Telford shopping centre for £200m, reflecting a yield of approximately 6.50 per cent.

According to DTZ super-prime equivalent yields have come in since Q4 2013, now at 5 per cent. Prime yields are between 5.50 per cent and 5.75 per cent, while yields for dominant secondary shopping centres have come in over the quarter to between 7.00 per cent and 7.50 per cent. Similarly, secondary shopping centre yields have also come in over Q1 2014 to between 8.25 per cent and 9.00 per cent and yields for tertiary shopping centres are at 10.00 per cent plus.

Barry O’Donnell, DTZ’s head of shopping centre investment, said: “The market remains buoyant with Q1 2014 volumes 56 per cent above the five year quarterly average. The high trading volumes this quarter were driven by a smaller number of bigger deals, although there is pent up demand for smaller lot sizes. Correctly priced centres are seeing high levels of demand and we are witnessing increasing capital flows and demand from Asian markets.”

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