Leisure attracts institutional investors
Published: 07 April, 2010
2010 could be the best year of the cycle for current vendors of leisure assets to sell as a result of a wider than usual spectrum of buyers entering the market, according to the latest commercial leisure bulletin from Savills.
The report concludes that the leisure sector has previously been regarded as relatively illiquid and dominated by a handful of specialist investors. However, the increasing recognition from institutional investors such as Scottish Widows and Hermes of the growing attractions of leisure assets, has led to the broadest base of potential investors in this sector for many years.
Andrew McGregor, leisure investment director at Savills, said: “Leisure investments have proved to be less volatile throughout this downturn with rents in particular remaining more resilient than in other asset classes. With this trend expected to hold strong throughout 2010 it will be a very opportunistic year for the raft of new risk averse investors to the sector in search of a stable income return, at a yield discount of up to 200 basis points over the equivalent retail assets.”
Savills research confirms that current levels for absolute prime stock stand between 7.0% and 7.25%, while prime pure leisure levels are approximately 7.5%. This is broadly in line with yield compression in other sectors, but still a significant premium risk to other more mainstream investment classes.
For those investors looking to enter the leisure market in 2010, Savills outlines two distinct options. The first is to focus on prime with leases in excess of 15 years (which are common place in this sector), index linked rents, strong covenants and in a retail micro environment. The other option is to seek asset management intensive opportunities where the prospects for rental growth could be significant. This option is aimed at the investors seeking more exciting levels of growth.
