UK shopping centre investment turnover for the first half of 2013 has been very healthy, with £1.928 billion transacted – more than double the £808 million transacted in the same period last year, according to data released today by Cushman & Wakefield.
The biggest news of Q2 has been Hermes and M&G Real Estate’s asset swap. Hermes (advised by Cushman & Wakefield) swapped the Friary Centre in Guildford for M&G’s 36% share in the centre:mk in Milton Keynes, bringing the centre:mk fully under Hermes’ control.
Cushman & Wakefield also advised Future Fund on the sale of its 33% share of The Bullring, Birmingham. Future Fund sold its stake to Hammerson and CPPIB for £307 million (5.25% NIY). Ownership of the shopping centre is now split between Hammerson, Henderson and CPPIB.
Other notable transactions this quarter include Pears’ purchase of The Spires, Barnet, from UBS for £31.2 million (7.5% NIY) and LaSalle’s purchase (advised by Cushman & Wakefield) of Church Square, St Helens, for £27.7 million (10% NIY) from the ING Britannica Portfolio. British Land has also bought out Tesco’s 50% stake in Surrey Quays for £48m (6.5% NIY), taking its ownership of the centre to 100%.
Other centres currently under offer include 50% of the Queensgate Shopping Centre in Peterborough, The Mall in Sutton Coldfield and Mell Square in Solihull. In total there are 20 schemes currently under offer with a combined value of £1.012 billion.
At the prime end of the market, the large regionally dominant schemes remain much sought after. Demand for such product has seen prime yields fall from 5.5% at the end of 2012 to close to 5.0% now. It is likely that investment demand for prime schemes will continue to outweigh supply, driving yields down further, as we anticipate that sentiment will continue to improve through the second half of 2013.
Demand for secondary stock is also healthy, despite the ongoing challenges at the occupational level. Recent secondary sales have generated encouragingly competitive bidding and, in some instances, surprisingly sharp yields.
There is now a relatively long list of investors who believe the secondary sector offers good value. With investment supply likely to remain constrained, we believe yields could start to sharpen over the second half of the year and we have bought in yields for major urban centres to 7.75% to
reflect this.
Charlie Barke, Head of Shopping Centre Investment at Cushman & Wakefield, said: “Turnover for the first half of 2013 has reached close to £2 billion, which is well over double the equivalent for 2012. There have been some big deals this year such as the sale of Bullring (33%) in Birmingham, the sale of Midsummer Place in Milton Keyes and the asset swap between Hermes and Prupim.
“Investment demand is encouragingly strong and we are seeing investors from all over the world wanting to acquire UK retail assets. There is a growing belief that the sector has reached the bottom and now offers decent recovery prospects.
“Even the more challenging secondary markets are now seeing stronger levels of demand and we are predicting some areas of yield improvement over the second half of 2013 as investment demand looks set to notably exceed supply. “
Cushman & Wakefield has been involved in £1.125 billion of shopping centre transactions so far in 2013, giving the firm a 60% market share. In addition, it is also selling the two biggest centres on the market at the moment: Bon Accord in Aberdeen at £200 million and St Enoch in Glasgow at £170 million.