Investment in UK retail real estate reached £3.7 billion (4.42 billion) in the first six months of 2010, a 15% increase on the same period last year, according to the latest data from CB Richard Ellis (CBRE) and Property Data.
Investor interest in high-quality retail assets across the UK, which developed in 2009, gathered pace during the first six months (H1) of 2010 with the majority of transactions influenced by money moving into institutional and retail funds. However, H1 saw stronger activity from non-UK capital sources, such as sovereign wealth funds and overseas investors, looking at good quality retail assets across the UK, and in particular, in Central London. Notable recent transactions include the purchase of Park Place (mixed-use development) on Oxford Street, London, by Qatari's Barwa Real Estate from Land Securities for £250 million.
UK shopping center investment saw strong activity in H1 2010 with turnover reaching £1.1 billion. The increase has been powered by more than 20 transactions, compared to the 24 transactions completed in 2009 as a whole. The largest UK shopping centre investment transaction in H1 2010 was Meyer Bergman's purchase of a 50% stake in The Bentall Shopping Centre in Kingston-upon-Thames in Surrey, for around £130m.
Bruce Nutman, Executive Director, UK Retail Capital Markets, CBRE said: "We are currently witnessing growing interest from international investors who are actively looking to invest in quality retail property investments in the UK. This is particularly the case with sovereign wealth funds, as well as other overseas investors, who have recently been very active in Central London.
"However, whilst demand remains strong, buyers now face limited opportunities in the market and are carefully reviewing the pricing and quality of existing opportunities. The supply/demand imbalance may help prices, but overall we expect prices to plateau or soften as the year progresses."
The current apparent stabilization in yields can be regarded as a welcome development, avoiding pricing becoming unsustainably stretched. Retail property yields remain attractive in comparison with either cash or Government bonds, and provide scope for reasonable returns over the medium term even with only moderate rental growth. The threat of a bubble with subsequent deflation looks to have been averted, creating more market opportunities for investors in the coming year.