Invest til you drop

One interesting aspect of the investment market is the amount of money going into shopping centres even though consumer spending is flat. That could be a sign that institutions are taking a long term view of a revival in spending in the UK where the building of new shopping facilities has eased considerably over the past few years.

In Bristol, HSBC European Active Real Estate Trust has paid £50.2 million for the Galleries Shopping Centre from the Mall Fund, of which Capital & Regional has a 16.7% shareholding. British Land is one of the companies taking a positive view on shopping centres with two deals in the South West in the past few months, giving it a total of 12 centres. It is buying the leasehold interest in the 12,000 sq.metres’ Green Lanes Shopping Centre, Barnstaple for £30 million. This is a very successful mall with 5.5 million shoppers a year and is over 99% full with all the High Street names such as Bhs, (the anchor), Mothercare and Wilkinson.

A few months earlier, British Land paid £240 million for the 52,953 sq.metres (570,000 sq.ft.) Drake’s Circus Shopping Centre in Plymouth which was a good deal for the developer because it gave a yield of 8%. Multi Development was also in the market to sell its half share in the 42,734 sq.metres (460,000 sq.ft.) SouthGate, Bath which it developed with Aviva Investors, who hold the other half share. A price of £150 million to give a 5% yield was envisaged. However, this has now been suspended. DTZ’s view of the investment market is that it is cautious characterised by inactivity for a large slice of 2010.

Another indicator is that institutions have narrowed their view, at least in the regional markets, of what is prime property. The agent argues that opportunistic investors have taken their profits from the market upturn and investors are for the most part sitting on their assets and paying down debt. Furthermore, it points out that yields are near their long term average and the outlook is, therefore, flat over the next year “with upside risks to 2011.” The question that hangs over this gloomy view is what will be the effect of the dead development situation with few new assets being built in the UK, apart from London.