As we head into the Christmas season and the public is busy buying gifts, our attention will be on what’s happening to the shopping centres themselves, as we expect to see several big sales complete before 2015 is out.

There are currently 23 schemes under offer, worth approximately £1.29 billion, and a further 44 in the market worth an additional £2.17 billion. The final three months of the year are therefore set to be very busy, with volumes increasing from £3.05 billion (currently down on the same point in 2014) to match last year’s £6.4 billion total.

Over the last 12 months, continued investor demand and a better quality of stock on the market have combined to harden average net initial yields for shopping centres to 6.97 per cent. The sales of Angel Central in Islington at £171 million (3.9 per cent net initial yield), the West One Shopping Centre on Oxford Street at £240 million (3.5 per cent) and Eastgate in Inverness at £120 million (6.75 per cent), all in Q3, saw extremely strong bidding as investors competed over both London and dominant regional assets.

The secondary market has seen a shift from distressed sales, which are still well received by investors, to well-managed assets held by property companies and private equity houses looking to exit ahead of their business plans, perhaps in some cases having 'licked the lollipop dry'. Overall, in both the secondary and tertiary markets, investor appetite for risk has dropped and demand is more sensitive to location, dominance, income profile and asset management opportunities.

It’s set to be a busy few months for shopping centres: their income and its diversity continue to make them very attractive to investors. But in the secondary market those parties who have lower return criteria are buying off rebased rents with good asset management skills and sensible debt aspirations are likely to lead the pack.

Further information

Contact Savills Retail.