REITS return to out-of-town market
Published: 04 January, 2011
DTZ forecasts REITs will continue to buy retail parks in 2011
Institutional investors have continued to drive up investment volumes in the retail warehouse market during the final quarter of 2010 accounting for 71 per cent of all transactions, according to DTZ's research. But the market received a boost with the emergence of interest from REITs, which drown investment volumes for the year to £2.37bn, matching 2009’s total.
Hammerson acquired the Wrekin Retail Park in Telford for £42m and Metric bought Havens Head Retail Park in Milford Haven for £14.4m. These acquisitions are indicative of a recovery in REIT activity across the wider market, a trend which DTZ forecasts will become a defining factor in 2011.
With insufficient prime stock available to meet institutional demand, competitive bidding on prime assets has been rife, both on and off the market, driving up pricing in the prime retail warehousing market. Such bidding has been typified in the retail warehousing market this quarter with strong pricing achieved, for example, with Aintree Racecourse Retail Park, which sold for £101.5m reflecting a blended yield of 5.3 per cent.
Marcus Wood, head of retail warehouse investment at DTZ, said: "Looking ahead to 2011, REITs will have a bigger part to play in the retail warehouse market. Overall, institutions will remain selective and are forecast to dominate the prime end of the market, but their desire for income may lead some houses to consider secondary despite the higher occupational risks."
