Knight Frank predicts UK shopping centre investment to reach pre-recession transaction levels by year end

The £1.17bn worth of shopping centres transacted during Q3 2014 is up 16.5% on Q2 2013 and the second highest quarterly figure since 2011. Indeed, over the first three quarters of 2014 combined, transactional volumes totalled £3.90bn, 32.2% up on the equivalent period in 2013.

Knight Frank’s research showed that given the current stock under offer at the moment and the amount of shopping centres being lined up for sale, they expect transaction volumes to significantly exceed 2013’s level and  match pre-recession transaction levels. They estimate that the out-turn could be around £6 billion, the highest level since 2006.

The largest single transaction in Q3 was Gingko Tree and Axa’s £267m acquisition of Cabot Circus in Bristol reflecting a blended net initial yield of 6.30% for the 50% interest.

According to Knight Frank, 10 shopping centres are currently under offer, with a combined quoted sales value of c.£768m. There are currently 27 shopping centres being openly marketed, with a combined value of approximately £1.08bn. For the most part the availability has been dominated by the continued sale of large centres and portfolio sales such as the Tiger Portfolio (consisting of 7 schemes), The Centre in Livingston (c.£200m), 50% of the Bentall Centre in Kingston (c.£180m) and the Praxis Portfolio (also consisting of 7 schemes).

Bruce Nutman, Partner, Head of Retail Investment at Knight Frank said, “Capital flows into the UK shopping centre investment market remain very strong. These latest statistics indicate that even large lot sizes do not sway the demand as is evidenced by successful sales of schemes in Sunderland and East Kilbride. The current trend to sell via portfolios is growing whether direct real estate or NPL portfolios. Project Leopard and Swallow-Tail are good examples with more to follow, offering varying quality of centres but a choice of yield and UK geographical spread. We anticipate that stock levels will remain positive through this year and into 2015.”

Knight Frank’s Anthea To, Associate, Commercial Research added, “It has been an exciting year for the UK shopping centre market so far and it has shown no signs of slowing down. The positive economic and investment outlook are laying foundation for consistent and strong growth and is also likely to leave investors in a confident mood. Reaching this pre-recession benchmark is encouraging and a cause for optimism which will give investors further confidence to invest time and money in the sector.”