UK Shopping centre stock levels increasing

A large number of UK shopping centre assets have come onto the market with over 20 schemes being openly marketed at present, according to Cushman & Wakefield. The largest schemes include The Kingfisher Centre in Redditch, where C&W is joint agent for SWIP, and Castle Court in Belfast. These are likely to attract a wide range of interest from REITs, property companies and opportunity funds.

There are also a number of schemes on the market with a capital value between £80-100m. They include: Houndshill in Blackpool; The Mall in Middlesbrough and The Grange/The Pyramids in Birkenhead. Schemes in the £35-70m range, include The Meadows in Chelmsford and Priory Meadow in Hastings.

Investment activity in the UK shopping centre market was subdued in Q2 2011 with nine transactions totaling around £479m. This represents a large drop from the previous quarter in which £2,069m was transacted in 13 deals, most of which were agreed at the end of 2010.

The largest shopping centre to change hands in Q2 was The King’s Mall in Hammersmith, bought by Matterhorn from St Martin’s. Other transactions include Invista acquiring Wellgate in Dundee – where C&W acted for the vendor, Prupim – and Orchard Street acquiring schemes in Lichfield and Chorley.

Institutions, REITs, property companies and opportunity funds are all investing in the sector. However, with significantly more choice than existed in the first five months of the year, investors can now afford to be discerning and selective.

The occupational market remains challenging, with retail sales figures failing to impress and some administrations coming through. With this backdrop, meaningful rental growth still seems a distant prospect in many schemes.

Charlie Barke, head of shopping centre investment at Cushman & Wakefield, said: “Following a relatively quiet start to the year, the sector has come alive since May. Turnover volumes for Q3 and Q4 look set to be high but currently both demand levels and pricing are holding up”.