Shopping centre volumes to rebound in 2013 – Colliers International

Total transactional volumes for UK shopping centres dropped 50% in 2012, says new research from Colliers International, to £2.36bn from £4.71bn the previous year, but the firm predicts that volumes are set to make a “dramatic return” this year.

The average lot size of the 34 centres that changed hands last year was £69.28m, but this was boosted by the two major deals – the sale of 50% of Meadowhall for £762.5m, and the sale of Festival Place in Basingstoke for £280m. Without those two deals, the transactional volume of deals in 2012 was £1.31bn, with an average lot size of only £41.03m, Colliers International says.

The most significant sellers last year were institutions, which accounted for 64% of transactions, says Andrew Marshall, member of the shopping centre investment team at Colliers International.

There are currently 11 centres under offer (£912m) and 15 (£85m) on the market, Colliers International says. The firm notes that six schemes were withdrawn from the market during the course of 2012, totalling £174m. Some schemes that have failed to sell may still be officially on the market, the firm notes, and could still be bought if pricing is acceptable. Putting together the value of the schemes still on the market and those withdrawn produces a total figure of £1.025bn across 21 centres, which is around 24% of total stock.

The development funding market has shown some early signs of recovery, the firm says, but investors still remain very cautious about leasing risk as concerns persist about retailer administrations and operational challenges. The above-average total of retail administrations last year has led to forecasts for rental growth being revised downwards, and Colliers International expects rental values to continue to contract this year, by around 2% – “although we anticipate this decline to be at a slower rate towards the end of the year”.

Andrew Marshall forecasts more loan sales this year, with debt buyers expected to take control of underlying shopping centre assets and to then put them up for sale. Overall, Colliers International expects investment volumes to rise by around 50% to £3.5bn this year, above the previous five-year average of £2.5bn, with yields remaining firm.