The total amount invested into UK shopping centres in 2016 reached £3 billion, according to international real estate advisor Savills. The firm says several large transactions, increased purchasing activity from councils and a rise in non-domestic investment all contributed to the sector’s bounce back in the latter part of 2016 after a slower than usual start. This compares to a total of £4.3 billion in 2015 against a long term average of £4 billion per annum.
Savills highlights Hammerson’s £335 million purchase of Grand Central, Birmingham, APG’s purchase of Edinburgh St James and intu’s £410 million purchase of Merry Hill, Dudley as 2016’s largest transactions, which inflated total investment volumes considerably. In terms of deal count, 42 shopping centre transactions completed in 2016, compared to 86 in 2015 and a long term average of 78.
The firm also reports that, while councils did not purchase a single shopping centre in 2015, they emerged as key players in 2016, making £386.7 million worth of acquisitions across 10 schemes. These transactions accounted for 13% of all UK shopping centre deals in 2016 and 44% of deals below £100 million. Additionally, non-domestic investors significantly increased their presence in the market, accounting for £1.35 billion of total transactions. Interest came predominantly from Europe, the Middle East and the US, says Savills.
The third quarter of 2016 was the quietest quarter on record, according to Savills, with just £111 million worth of shopping centres traded. However, the fourth quarter saw volumes return to a robust £1.27 billion. This is broadly in line with the long term average and comparable to £1.35 billion traded in Q4 2015.
Mark Garmon-Jones, head of shopping centre investment at Savills, comments: “The UK shopping centre investment market had an unusual year in 2016. The impact of wider themes including the result of the EU referendum meant that the third quarter was particularly quiet, with only six deals totalling £111 million completed. The final quarter saw investment volumes return to near normal levels. We expect this momentum will continue into 2017, however investors have one eye on the Brexit negotiations and the other on retailer performance.”
The Savills shopping centre investment team advised on £1 billion of shopping centre transactions in 2016 in 10 deals representing a market share of 33%.