Completed UK retail warehouse investment transactions totalled £635 million across 28 transactions in Q2 2015 bringing the half-yearly total to £1.31bn, according to research published by DTZ.
The second quarter of the year saw a number of large transactions. The five largest had a combined total of £298.4m accounting for 46% of total transaction value.
Transaction volumes for Q2 2015 are up 33% on the same quarter last year while H1 2015 volumes are up 27%.
Funds continued to dominate acquisitions in Q2 2015, accounting for 79% of purchases, with key players including L&G, Schroder’s, M&G and Standard Life. The vendor profile was also dominated by funds which accounted for 61% of sales. Key players such as Aviva, Aberdeen and Threadneedle continued their trend of being more active, accounting for 61% of all sales volume.
Marcus Wood, Head of Retail Warehouse & Leisure Investment, said “The first half of the year has seen strong liquidity within the retail warehouse sector. Stock has increased with a significant amount set to enter the market in H2 as a number of funds look to take advantage of market liquidity. We believe supermarkets are currently ‘oversold’ with yields stabilising by the end of the year while the household goods and furnishings has seen positive retail sales growth which should indicate rental growth.”
The occupational market has continued to improve as retail sales saw the 26th month of consecutive year-on-year growth and the consumer confidence index at its highest level for almost 15 years. The improvement in customer sentiment and continued growth of retail sales has been reflected in falling vacancy rates. According to Trevor Wood Associates, the retail warehousing vacancy rate at 7.1% is at the lowest level since the end of 2004, with open A1 vacancy rates at 6.1% and open non-food schemes falling to 7.3%.
David Thompson, Head of Retail in the North of England comments: “It’s particularly interesting to note that two transactions in Yorkshire, Monks Cross and Birstall, accounted for nearly 25% of the UK transaction volume in H1. This illustrates the strength of investor demand for high quality stock in the region.”
Jonathan Rumsey, Head of Retail Market Analysis at DTZ, said: “Retail sales as measured by the ONS have seen the longest sustained period of growth since 2008. Low inflation, rising employment and real wage growth have led GfK’s consumer confidence index levels to rise to a level not seen since the turn of the century, while vacancy rates remain at their lowest since 2010.
“Retailers are acting positively by making strategic occupational property direction decisions against a strong macroeconomic position. This positivity has seen the list of retailers acquiring floorspace continue to grow, including the likes of Ikea and House of Fraser.”
