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.
Q1 reflects a healthy level of stock, with a broader range of lot sizes transacting. The average lot size of the 13 shopping centres was large at £112m, which is skewed by larger lots at the prime end of the market.
The headline transaction for 2014 was the purchase of a 50% stake in Westfield Merry Hill and the 100% purchase of Westfield Derby, both by Intu Properties Plc (Subject to completion of the Rights Issue). The purchase price for the 50% stake in the Merry Hill shopping centre was £371m reflecting a Net Initial Yield of 5.21%. Intu also bought Westfield Derby for £390m, at a 6.89% Net Initial Yield. Together these two transactions accounted for approximately 60% of the total transaction volume in Q1. Another key asset to complete in Q1 was Trinity Walk in Wakefield, which sold to Orion Capital Managers for £160m, reflecting a Net Initial Yield of 6.25%. Prime centres under offer in Q1 include Intu Uxbridge, reportedly under offer to KWAP who have offered £215m reflecting a Net Initial Yield of 5.50%.
Other notable secondary assets to transact this quarter include the Eastgate Mall in Basildon, which Infrared Capital Partners purchased from British Land for £88.60m, reflecting a Net Initial Yield of 7.35%.
Meanwhile, several high profile deals have gone under offer in Q1 including a 50% stake in Cabot Circus, Bristol under offer to AXA and a Far Eastern investor for a reported £270m , which reflects a 6.25% Net Initial Yield. Similarly Intu Uxbridge is also under offer to a Far Eastern fund with KWAP reported to be in negotiations to purchase the shopping centre for approximately £210m reflecting a Net Initial Yield of 5.85%. In addition Orion Capital Management is understood to have placed under offer a 50% stake in Telford shopping centre for circa £200m, reflecting a yield of approximately 6.50%.
Barry O’Donnell, Head of Shopping Centre Investment, said: “The market remains buoyant with Q1 2014 volumes 56% 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, where DTZ is the number one adviser.”
James Bladon, Associate Director in DTZ’s Investment team in Birmingham, comments: “The investment market is buoyant, with improved economic data, strong investor appetite and easing funding markets resulting in healthy shopping centre transactions. The national picture is echoed in the Midlands with significant shopping centres changing hands, such as Westfield Merry Hill and Westfield Derby.”
Jonathan Rumsey, Head of Retail Market Analysis at DTZ, added: “The UK economic recovery appears to be well entrenched and is forecast to grow 2.6% this year. Retail sales continue to see volume growth with the ONS reporting 4.2% growth in February on the same month last year, led by household goods sales due to the recovering housing market. Consumer confidence has improved dramatically since last year, reaching the highest reading since August 2007 and we expect this upward trend to continue. The UK shopping centre investment market is seeing strong interest from both domestic and increasingly global investor resulting in yields hardening across all shopping centre subsectors.”