Investor appetite for shopping centres reaches fever pitch in the UK

Investor appetite for shopping centres reached fever pitch in the third quarter of this year seeing investment activity soar to £792 million – double the previous quarter.

According to new research published by DTZ, investment activity during the third quarter had shown almost a 100% increase on the previous quarter, which stood at just £414 million. By comparison, the total invested in the third quarter is over twice the total invested in the third quarter in 2001, which saw investment reach £325 million.

Of the £792 million total, all transactions were standing investments, comprising 27 schemes sold, reflecting an average lot size of £29 million - in addition to the funding of Fremlin Walk, Maidstone between Land Securities and Centros Miller which totalled £100 million. Compared to the previous quarter, although there were some 24 schemes sold, the average lot size was significantly smaller (circa £17 million) resulting in the lower total of £414 million.

Both institutions and property companies continue to dominate investor activity in the retail sector, although the institutions have been more active during the third quarter. Banks are still investing heavily within the sector, either by way of straightforward loans or through joint ventures, and as a result, property companies and debt-backed purchasers continue to play a major role in investment activity.

Geographically, the south-east marginally tops the table accounting for 25% of investor activity, closely followed by the north-west and north-east which account for 24% and 23% respectively.

Mark Williams, Head of Retail at DTZ, believes that this strong level of investor interest in shopping centres will continue in the final quarter of 2002 due to a number of favourable factors boosting the attractiveness of the retail sector.

He comments: 'There were a significant number of shopping centres marketed during the beginning of the third quarter of 2002. Investors have sought to take advantage of the competitive investor environment together with the available weight of money, which is delivering premium prices on shopping centres.

'Shopping centre investment sentiment is anticipated to remain strong throughout the remainder of 2002 and into 2003. The strength of occupational and consumer market is key to future market performance as the Government´s tax and spending policy will benefit key sub-sectors of the retail and shopping centre market. The economic outlook is stable at the current time and both property and retail continue to top investors shopping lists, as a result we expect to see the year end on a busy note.'

(source: DTZ International)

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