UK shopping centre investment momentum continues

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UK shopping centre investment turnover for the first quarter of 2014 has remained positive – following a strong finish to the end of 2013 – with transactional volumes totalling £1.77 billion, according to data released today by Cushman & Wakefield.

This quarter’s figure is 68% ahead of the Q1 2013 total of £1.05 billion.

In one of the largest single asset deals of the quarter, Cushman & Wakefield advised Land Securities on the sale of Overgate, Dundee, to Legal & General for £125.3 million, reflecting a net initial yield (NIY) of 7.5%. The firm also advised InfraRed on the purchase of the Eastgate Centre, Basildon, for £88.6 million (7.15% NIY).

Other key deals included intu’s purchase of 50% of Westfield Merry Hill and 100% of Westfield Derby for £795 million as well as the sale of Aviva’s 73% share in Liffey Valley, Dublin, to Hines for £216 million (8% NIY).

There are currently eight shopping centres under offer in the UK, with a combined total value of more than £900 million. These include intu Uxbridge, Cabot Circus in Bristol and Bracknell town centre regeneration.

Charlie Barke, head of shopping centre investment at Cushman & Wakefield, said: “There has been increased demand from international investors and UK institutions in Q1 due to a stabilisation of the occupational market and a stronger economic outlook. However, vendors of prime stock are rare with most owners preferring to extend their portfolios at the premium end of the market.

“Buoyed by the greater availability of finance, investors are now increasingly targeting good secondary opportunities, which have high yields and potential for asset management.

“With the current excess of investment demand over supply, both prime and secondary yields will remain under pressure in the first half of this year. We believe prime yields are currently at 4.75% and are under downwards pressure.”