Investment into UK foodstores reached £1.23 billion in 2016 according to international real estate advisor Savills. Operator-led transactions dominated the market accounting for approximately £590 million; 49% of total volumes. Excluding these operator-led deals, overseas investors were the most active in the sector, accounting for 22% of volumes (c.£257million).
Savills highlights that Middle Eastern investors have been particularly active in the sector, accounting for £180 million of investment. This resulted in 2016 being their most active year on record accounting for almost 70% of total overseas investment. The longer leases associated with the sector and index linked reviews, continue to make foodstores an attractive asset to overseas investors.
The firm notes that London and the South East continued to be the most liquid markets, accounting for 47% of volumes (c.£580 million) in 2016. There was a 15% increase in investment into London as the residential angle offered by some assets has intensified investor interest.
Katie Taylor, investment director at Savills, comments: “Overseas buyers have been a dominant investor in the market appreciating the longer term strengths of the foodstore sector. The globally recognised brands, ease of management, certainty of income and wealth preservation benefits associated with the sector continues to appeal to international buyers, and has been further boosted by the recent currency play. As income security has become a bigger concern following the EU referendum vote, we suspect we’ll start to see the institutional investors start to come back in 2017.”