Shopping centres market ‘very healthy’ – Cushman & Wakefield

The UK shopping centre investment market has been “very healthy” so far this year, says Cushman & Wakefield, with £1.928bn transacted in the first six months – compared with £808m a year earlier.

There is still plenty of demand for the large, regionally dominant schemes at the prime end of the market – which has led to a fall in prime yields to close to 5.0%, from 5.5% at the end of 2012. Cushman & Wakefield thinks investment demand for such schemes is likely to continue to outweigh supply and to drive yields further downwards. Demand for secondary stock is also robust “despite the ongoing challenges at occupational level”, the firm adds. “Recent secondary sales have generated encouragingly competitive bidding and, in some instances, surprisingly sharp yields,” it notes. C&W thinks yields could start to sharpen during H2 2013 for this type of property to around 7.75% for major urban centres.

Charlie Barke, Head of Shopping Centre Investment at Cushman & Wakefield, said: “There is a growing belief that the sector has reached the bottom and now offers decent recovery prospects.” “Even the more challenging secondary markets are now seeing stronger levels of demand and we are predicting some areas of yield improvement over the second half of 2013 as investment demand looks set to notably exceed supply. “

Among the many transactions during the first half of the year, Cushman & Wakefield highlights the deal in Q2 2013 in which Hermes (which it advised) gained full control of the centre:mk in Milton Keynes by swapping the Friary Centre in Guildford for M&G Real Estate’s 36% share in the centre:mk. C&W also advised Future Fund on the sale of its 33% in The Bullring in Birmingham, which it sold to Hammerson and CPPIB for £307m.

UK shopping centre assets currently under offer include The Mall in Sutton Coldfield and Mell Square in Solihull, C&W notes. In all there are 20 schemes currently under offer, valued at a combined £1.012bn.