Colliers warns of new downturn
Published: 21 March, 2011
The latest Property Snapshot from Colliers International points to deteriorating conditions in both the investment and occupational markets
In the investment market Colliers says prime pricing remains stable, although secondary pricing is weakening. Prime assets remain in very short supply, and this is inhibiting transaction levels.
And aside from overhangs from 2010 such as the receivership sale of Sapphire Portfolio, which fetched £145m at 8 per cent, few deals have completed. Kettering changed hands for £38m at a yield of 7.75 per cent; and Colliers says there were 10 to 15 parties looking at the deal due to the lack of alternatives, which is illustrative of the profound shortage of prime assets on the market.
The picture is brighter for retail warehouses, however, and interest remains very high from funds. Recent deals completed include the Ocean Retail Park in Portsmouth which sold for £60m at 5.8 per cent; St Georges Retail Park in Leicester which sold for £49.9m at 5.9 per cent and the Bromley Road Retail Park in south London which sold for £26.1m at 6.5 per cent.
On the occupational front Colliers reports that consumer confidence remains low, with fuel price hikes and general inflation eroding disposable income. “February has seen a substantial fading of January’s sales rebound with the BRC reporting that like-for-like sales fell 0.4 per cent in February. Retailers with substantial inventories like Debenhams and John Lewis are discounting heavily.
Several mid-cap retailers have seen substantial short selling of their shares, especially HMV, Mothercare and Home Retail (Argos), after reports that promotions have failed to generate sales. JJB has agreed new terms with landlords, and landlords for Focus DIY have agreed to continue accepting monthly rents. JJB sales are down 13.5 per cent on a like-for like basis in Q1 11.
Colliers’ view is that trading conditions are deteriorating with discounting failing to stimulate sales. Landlords showing flexibility to keep tenants as a new round of profit warnings are expected.
