Golden Square Warrington

BCSC: Shopping centre sales beat average

Nine UK shopping centres have transacted for a combined £717m in Q3 2014 so far, according to DTZ. With three weeks to go and almost £1.17bn currently under offer, the quarter is set to pass the £833m volumes of Q3 2013.

DTZ released the figures on the opening morning of the annual British Council of Shopping Centres Conference & Exhibition at Olympia in London. Exhibitors at the influential retail property gathering include Cheshire West & Chester Council, promoting Northgate Chester and Barons Quay, Northwich.

DTZ said the most significant transactions in the quarter to date include AXA's purchase of a 50% stake in Cabot Circus in Bristol from Land Securities for £267.80m at a net initial yield of 6.25% and Orion Capital's purchase of East Kilbride Shopping Centre from Delancey Estates and RBS for c£180m at a c6.75% NIY. Centres currently under offer include Telford Shopping Centre which Orion Capital is looking to purchase from Ares and Sovereign Land for £200m at a 6% NIY and William Ewart Properties' sale of Fulham Broadway and Hammersmith Broadway for a similar price.

Alongside centres that have been sold, exchanged or under offer, there are 30 shopping centres being openly marketed totalling £887m. Two of the larger lot sizes include the Praxis Mall Portfolio and LIM's Brunswick Shopping Centre, London.

Shopping centre investment volumes for the year to date have reached close to £3.45bn across 40 shopping centres. This figure is likely to increase as the quarter nears completion, but it is already ahead of the £3.06bn transacted across 52 centres in the first three quarters of 2013. The biggest transaction by far has been the sale of Lend Lease's 30% stake in Bluewater to Land Securities which at £696m was more than £300m more than the second-highest priced transaction.

With stock under offer and on the market totalling approximately £2bn, 2014 is set to surpass the £4.45bn of shopping centre transactions volumes recorded in 2013 and smash the long-term yearly average since 2000 of £3.65bn.

Investor sentiment and weight of money in the market has remained extremely strong in the year to date with the heightened demand and frustrated capital continuing to exert pressure on yields. Super prime yields are currently at 4.50% having come in from 5.00%/5.25% at the start of the year, although DTZ sees this trending as stable. This is supported by the pricing of the 30% interest in Bluewater – although it is worth noting a premium applies to this unique asset due to its strength and appeal to international retailers. Prime yields have come in over the quarter to date, now at 5.25% having started at 5.50%/6.00% in January.

Investors are now moving up the risk curve which has resulted in pressure on dominant secondary and secondary yields, the latter which are now at 7.75%/8.25%, having been at 8.75%/9.75% at the start of January. Yields for tertiary shopping centres are at 9.00%, which tightened from 11.00% at the start of the year. All yields, bar super-prime, are trending in.

Barry O'Donnell, head of shopping centre investment at DTZ, said: "The current phrase on everyone's lips is distressed buyers, no longer distressed vendors. This may be slightly exaggerated but it is certainly becoming harder to buy than it was and there continues to be significant weight of money in the sector. Investment volumes are already ahead of last year for the same period and we anticipate a strong end to the year resulting in volumes surpassing last year and smashing the long term average."

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