Shopping centre sales jumped by 70pc last year
Shopping centres were caught up in a whirlwind of activity last year.
A total of 84 centres worth £4.58bn changed hands, up 70 per cent on the previous year when £2.7bn of assets were sold, with this activity set to continue into 2014, according to Savills research.
The weight of capital coming into the sector drove initial yields down in the fourth quarter of last year to 7.6 per cent, from 8.94 per cent in the same quarter of 2012.
Major deals that took place last year include the sale of Royal Exchange near Bank station to Oxford Properties for £83.5m and London’s Elephant & Castle Shopping Centre, which was bought by pension fund APG and Delancey for £80m.
According to Savills, there are currently 18 shopping centres under offer accounting for £1.35bn, 13 in the market accounting for £1.7bn and approx 22 shopping centres being prepared for sale.
But with high-end shopping centres in such short supply, real estate investment trusts and sovereign wealth funds are now having to take up 50 per cent passive stakes in a joint venture with another partner – something they would not have considered 12 months ago.
The debt markets remain extremely active, with a broad range of lenders offering competitive terms. However these lenders are primarily focussed on lending against the best assets out there and borrowers with secondary and tertiary assets finding it hard to access debt or being subject to much stricter terms.
One note of caution on the horizon is the creeping rise in swap rates which are beginning to factor in future interest rate rises. The impact on the markets, yields and types of buyers is yet to be seen. Our prediction is that as swap rates creep up, margins will come under pressure, yields will likely harden and the opportunity funds/private companies will be priced out of many situations leaving an institutionally dominated market in 2015.