Savills has forecast 2009 shopping center investment turnover will exceed 2008's £1.5 bln. following a marked change in investor sentiment towards the sector, which has seen yields begin to harden in Q309.
The international real estate advisor reports that four shopping centers are currently under offer totalling circa £600 million and £1.196 bln. has already been transacted between Q109 and Q309. The key issue for the market, Savills says, is the lack of available stock with only two assets being openly marketed in the towns of Shrewsbury and Pollok, Glasgow. This lack of stock has pushed yields down by 58 bps from 8.63% in Q2 to 8.05% with a further yield hardening anticipated as circa 40 investors are actively targeting the market.
Nick Hart director of shopping center investment at Savills says: "Two of the assets currently in the market are the first to be offered through bondholders and banks. The movement in yields will not only be a comfort to these sellers but may well encourage further stock to come to the market. REITS are back in force and under pressure to buy."
Likewise in the high street investment arena, Savills finds demand has forced prices up and prime top quality assets have been sold at up to 150 bp lower than at the turn of the year. In particular the report notes institutions have rapidly turned from sellers to buyers.
Jeremy Lovell, director of high street investment, adds: "Property currently provides a better income return than sitting on cash and as demand outstrips supply there is further prospect of capital growth. We may well see investors, who took bold decisions earlier in the year taking profit."
In the leasing markets, Savills reports an improved number of leasing deals in the quarter as new openings are secured for Christmas trade and the level of vacancies has reduced. Where rent reviews have previously been disputed, often referred to third party, this surge in deals being done has provided evidence on which to base reviews although it has been noted that a fall in retail rents has been crystallised in the form of heavily incentivised deals. Meanwhile, consumer confidence has improved significantly over the past quarter but remains week. Savills believes that unemployment needs to fall and clarity on public spending cuts and tax rises will be necessary before savings rates start to fall and consumers begin to spend more liberally.
Chris Blair, Savills UK head of retail, comments: "Nerves appear to have continued to calm amongst landlords and retailers and with Christmas anticipated to be reasonably healthy, they should be cheered."