Whilst transaction volume for Q2 stands 7.7% higher than Q1, this was largely due to a key transaction at the top end of the market – the sale of a 30% stake in Bluewater Shopping Centre, Kent, which accounted for 46% of total transaction volume in Q2. Leading UK REITs and institutions were among the top contenders who showed strong interest for the centre.
Knight Frank’s research showed that current supply levels are on an upward trend. There are currently 19 shopping centres being openly marketed, with a combined value of approximately £618.7m, compared with 8 assets at the end of Q1 2014. However, there is still a shortage relative to the level of capital seeking assets.
H1 2014 has shown £2.7bn of deals compared to £1.98bn for the same period in 2013. Given the current stock under offer at the moment and the amount of shopping centres being lined up for sale, Knight Frank expects the market to be very active over the next three months and transaction volumes are on track to exceed 2013’s level.
We continue to see the trend of off-loading bad debts/receivership via (direct or debt) portfolios and interest is coming from a wider list of buyers.
Bruce Nutman, Partner, Head of Retail Investment at Knight Frank said, “The Swallow-Tail portfolio (via RBS) that just gone under-offer is a good example demonstrating the depth of interest coming from a mixture of buyers and the continuing trend to off-load bad debts. On the other hand, we saw a declining trend of debt portfolios being offered in the market with retail content as most have been sold. Going-forward, the key to success in a mature and experienced market is to get the pricing correct. Whilst there is a lot of equity chasing the shopping centre sector, over-pricing can lead to no sale.”
Knight Frank’s Anthea To, Associate, Commercial Research added, “Recently, forecasters have been more upbeat on the prospects for the UK economy and retail sales continued to grow although at a slower pace. We expect improving consumer confidence, healthy employment growth and heavy discounting will continue to drive retail sales volume, however the continued price deflation may pose challenges on some retailers. The retail sector will continue to report mixed news in the short term.”